Today’s podcast features a discuss led by Heather Jarvis, a nationally known expert on the topic of student loans and their repayment. Heather is a regular speaker at financial service seminars where she lectures financial professionals on the need to learn more about these programs before giving advice to their clients.
In this episode, Heather shares her personal experience with student loans and discusses the challenges faced by those who are repaying student loan debt. The discussion covers a wide range of topics including:
Larry: [00:00:26.41] So we have our usual group here today with Heather Jarvis and Janet Hoffman. And today we’re going to start out by spending a bit of time with Heather. I’m really excited about this one. And hearing more about your story and sharing it to our audience. Your web site indicates you are the student loan expert and from everything, I know about you and I’ve heard from others you truly are. Tell us how you became a student loan expert.
Heather: [00:01:07.72] Well the first thing I did along my path to expertise was to start borrowing student loans when I was 18 years old. I got my first loan Perkins loan and I qualified for a Perkins loan because of my exceptional financial need. My family didn’t have a lot growing up. My sister and I are the first generation to graduate from college or attend and graduate college. And so I borrowed about one hundred and twenty-five thousand dollars by the time I graduated from the law school at Duke. And I’ll tell you I had no idea what that would mean for my life and my family’s financial security. And I have very few regrets about borrowing that money.
Heather: [00:02:12.58] But I do wish I had been better informed and that I had asked more questions. But I think I just I didn’t even know what to ask. I mean I came from a family that didn’t have money so didn’t understand you know money or interest or borrowing. I mean I recall my mother never even had a credit card that wasn’t a thing. And so I had these opportunities to pursue education and I knew that it was an important and valuable way of getting enjoyable work and contributing back to society and all that stuff. But I just financially I didn’t have a clue. And I always knew I wanted to be a public interest lawyer because I was kind of more of a social worker kind of lawyer. And what I didn’t quite realize although it makes perfect sense is that lawyers who help the poor end up being paid rather less than lawyers that represent wealthy corporations. I’m sure that comes as no shock to the listeners that I borrowed a lot of money and wanted to work in the lower-paying public sector jobs and found that all rather difficult to juggle and I. learned a lot of life lessons and lessons about money along the way. And so yeah after doing about a half a dozen years of working on direct legal representation I really wanted more of an opportunity to help other people access education and not have to sacrifice their whole financial security in order to do it.
Heather: [00:04:07.54] So I was super lucky to land a cool job in D.C. at a nonprofit called Equal Justice Works. And part of our mission was to reduce the financial barriers to practicing public interest law. And the biggest financial barrier was student loan debt. So I got to do things like participating in the drafting and lobbying around the College Cost Reduction and Access Act which is the one that created public service loan forgiveness and income-based repayment. Two of the biggest things to happen in the student loan world in our lifetimes. And I guess so that’s been very rewarding. Along the way, I learned that like many other things the student loan system is not especially friendly to the consumers and borrowers and that it is difficult to navigate successfully. So people need help. And I have dedicated my professional efforts to assist. Getting student loan borrowers so that they can make good choices and end up not pay more than they have to for their educations.
Larry: [00:05:36.53] What are the hot topics now what are people wanting to know most when you go out. What do they ask what are their issues?
Heather: [00:05:45.05] Well depending on the audience I think what student loan borrowers want to know more than anything else is whether they can count on those programs that exist. The Public Service Loan Forgiveness program as well as the income-driven repayment options and the like. So they worry about the future and they are concerned about the details as they should be because they are many.
Heather: [00:06:19.34] And then from the perspective of the financial advisers I speak to I find that the topics are similar so they are most interested in the details of how to position their clients to benefit from the forgiveness provisions that exist. And of course that means that they need a clear understanding of the income-driven repayment options in particular as well as the different loan types and forgiveness provisions and the kind of detailed requirements so financial advisers that have interactions with young professionals those that are working to expand their practice into people who are not already you know of tremendous wealth but who are building their capacity for that. So people who have strong educations and incomes but haven’t built net worth yet like you know relatively recent graduates from medical school law school veterinary school that sort of thing. Financial advisors who are interested in supplying services to those people know that this issue is top of the mind for those clients. And so those advisors want to ask me you know how can I be sure I’m doing a good job on these cases and I’m not missing anything. So they like to get into those nitty-gritty details. Speaking of public service loan forgiveness.
Larry: [00:08:20.02] How how big of a problem is this. I mean is this something that there’s just a massive number of people that are actually already on target for me or when I say on target I mean are they actually considering it. I give me your perception of the consumer market or are they just looking to reduce their payments or some people and I’ve read some of these articles that say I know I’ll never be able to pay off this debt. I need to find another way which kind of implies loan forgiveness. I mean what’s the scope of the problem.
Heather: [00:08:57.77] Well the overwhelming majority of graduates from professional programs by which I mean you know medical-legal dental pharmacy veterinary; And I I distinguish that from graduate programs like masters and Ph.D. of various sorts although those programs can be very expensive as well particularly in the professional programs. There’s very little scholarship money in grant money for students. So everyone who does not arrive with wealth with significant wealth will have a large student loan balances. So it’s not at all unusual for people to have a six-figure loan balances sometimes you know two-three and more hundreds of thousands of dollars in debt.
Heather: [00:10:00.65] And so so all those people have some potential for loan forgiveness and depending on their earning over time they may well be better off pursuing that strategy for their student loans. So you know one kind of rule of thumb that is a little bit simplified but a nice way to kind of start your analysis is if you have a client coming in the door who owes more on their federal student loans than their current annual salary, you definitely have to evaluate whether forgiveness might be the best outcome for that client.
Heather: [00:10:55.99] Now on the other hand if someone comes in makes twice as much money as what they owe. They might be better off with more of a traditional debt management plan of you know repaying as quickly as possible in order to avoid interest accrual. But the vast majority of recent graduates from professional schools as well as a significant number of graduates from other masters and beyond programs have. circumstances that warrant a careful analysis of their ability to benefit from forgiveness.
Larry: [00:11:47.59] Okay so it sounds like that, in any case, someone who has this debt needs professional help.
Heather: [00:11:56.83] Right. And even people who think that they have done their homework may not have all the information they need. You had mentioned Public Service Loan Forgiveness, in particular, many borrowers and advisors alike have the general knowledge that Public Service Loan Forgiveness requires employment in the public sector nonprofit or government for 10 years in order to achieve loan forgiveness. And that is so oversimplified of an understanding as to be practically misleading.
Heather: [00:12:46.84] I mean it’s not technically wrong but it’s just so incomplete that it doesn’t get people anywhere Public Service Loan Forgiveness is not handed out for doing public service. It’s not automatic. It’s not easy.
Heather: [00:13:05.35] And so people with student loans need competent advisors that will look at their particular circumstances. They need to evaluate whether the borrower has eligible loans direct loans or whether they may have some other loans like Perkins loans or fell loans from a previous federal program that could be eligible but only after consolidation and they need to select the appropriate repayment plan and income-driven repayment plan. There are five nuanced plans to choose from each having pros and cons and tradeoffs.
Heather: [00:14:01.33] So unfortunately what can happen is you can have a borrower doing everything they’re supposed to do making their payments working in public service and not actually be progressing towards forgiveness in the way that they ought to be. And I think that’s one of the best things that a trained advisor can do for such a client is to double-check you know do you have the right kind of loans.
Heather: [00:14:35.89] If not you know can we consolidate if we do what would be the downside to that do you. Are you in the right repayment plan? Would you be better off in a different plan? And then there’s the whole you know other wrinkles of managing the record-keeping within the loan servicing system that exists.
Heather: [00:15:05.95] So you know gents I will talk at any moment about problems with the companies that administer these loans program on behalf of the federal government. Many mistakes are made. Misinformation is given and. It’s really a hard time to be someone who owes student loans to the federal government. It’s not the kind of thing you want to try to manage on your own.
Larry: [00:15:38.07] That’s one of the things I want to get into the loan servicer is is particular because I know Jantz has had a lot of experience with that but what I’m gathering here is that this is not a I will call it a set it and forget it situation, in other words, say OK I establish my repayment plan and I’m on track now I just keep making payments and 10 years later it all happens. I get the sense that it perhaps requires a little nurturing and maintenance over what over the over every year or what are you recommending.
Heather: [00:16:18.78] Yeah I think that’s exactly right. I think that people need help in establishing a strategy and setting up the arrangements to pursue a particular outcome. So as you said it’s not set it and forget it but you do need to start by setting it. So figure out what’s best based on the information you have now. So there’s sort of a lot that can be done initially for a borrower evaluate their loan types their payment plan their payment history their interest rates the possibility of the benefits or lack of for refinancing and the like.
Heather: [00:17:11.31] But then you’re absolutely right. That is not sufficient because you’re only able to really do kind of projections at that point based on your estimates of future employment future income future family size and then as circumstances unfold you can take that reality and cross-check it against the assumptions you had made. And so I think you’re right.
Heather: [00:17:46.17] I think annually it’s worth reviewing a student loan strategy to ensure that it still makes sense and that there isn’t any tweaking that could improve it. And additionally with life changes. So things like marriage divorce the birth of a child changing jobs moving to buy a house because all that stuff is interrelated. You know Jantz does a great job in The certified student loan professional program of study of showing us case examples and showing how a savvy planner can do things like advising a borrower to save additional money for retirement thereby reducing their adjusted gross income lowering their student loan payments driven by their income and increasing their forgiveness over time.
Heather: [00:18:59.01] So those kinds of clever holistic plans must be responsive to what goes on in the life of that borrower. So it really is smart for a student loan borrower to get good advice and continue checking in in order to sort of maximize their total package which is a kind of a cool opportunity for advisers to who may be wanting to have a younger client base a way of bringing in people who are not graying and getting ready to transfer their assets to the next generation. What what advisors can look forward to if they become prepared to assist student loan borrowers is you know that can just be the beginning of a long relationship where you can benefit your clients by helping them with you know comprehensive financial planning services over time that is focused around the student loans but that is much broader than that. And that can develop into you know then they can be investment clients. With assets hopefully under management, you know over time as their success builds with you know competent advice that you’ve been able to give them.
Jantz: [00:20:37.97] Let me jump in there and kind of piggyback on that within my own personal practice. I really see the student loan advice as a means of establishing relationships with new clients. And I understand that those clients don’t have significant assets many of them are just walking out of school; They’re single that they have student loans they’re paying rent. That’s about the extent of their financial plan. But most of them will mature over the coming years and provide great opportunities to do those comprehensive plans whether it be looking at protection within their family when they get married and purchase a home whether it be saving for a kid’s college or saving for retirement or starting their own practice.
Heather: [00:21:28.69] Those are the natural progression of these clients lives. But the relationship is formed by helping them with their first real financial decision which is how to deal with the student debt they accumulated while achieving their professional degree and then nurturing them through almost like a mini financial plan just focused on their student loans until they mature in their lives and are ready to take the next step in in the planning process.
Larry: [00:22:00.26] That’s a that’s a really important point I think a lot of people need to hear. I mean both the advisors and certainly consumers. I think there’s a lot of people coming out of college with debt probably think because they don’t have assets that there’s no need to talk to a planner there’s no need to go into this because they’re feeling like they have no money to save. I’m just struggling to get started.
Heather: [00:22:29.17] Yeah. And one of the reasons for that Larry is because there are a lot of planners that are not prepared to provide the service that student loan borrowers are looking for. So you know years ago when borrowers would say Who can I hire to help me figure this out. Heather I would have to say well you know traditionally financial planners and advisers may be more educated and experienced in wealth management than in any kind of debt management.
Heather: [00:23:08.89] And I would caution borrowers to really vet people to ensure that you know weren’t only going to be interested in working with you if you already had a lot of money to invest store if you were looking for certain you know if they wanted to sell you certain kinds of insurance that may or may not be appropriate. So I think one of the reasons borrowers feel like oh a financial adviser might not be able to help me is because not everyone can. Not everyone is prepared but I’ve just been delighted by the response from the community of financial advisors. You know I’m. That’s not my educational or professional background. And I’ve just been you know really pleased to meet people in financial advising and planning because they do have for the most part marvelously compassionate motives towards their client. They want to help and they want to do a good job. And so you know more and more people are realizing wow there’s a lot to know about this student loan stuff. And I can’t just wing it. I better you know really do my research so I can do a good job. So I do think that’s changing.
Jantz: [00:24:44.77] I think Heather part of the reason why there isn’t a lot of advisors that know this material is probably twofold. One the industry is very much history has been focused on assets under management. So it’s always been targeting those individuals that already have accumulated a lot of assets but also within the financial services industry it’s a real aging industry aging demographic of not a lot of young entrants not a lot of young people are heading into financial advising most of them are going into other career passing in finance and because of that you have the people giving this. Nice oftentimes.
Jantz: [00:25:27.18] Maybe a generation removed from the issue which is the increased amount of student debt people have and their particular clients didn’t have or maybe had significantly less student debt when they were establishing relationships ships with them maybe 20 or 25 years ago.
Jantz: [00:25:45.0] I would just say that that’s something that the industry needs to come around to is that this is what I was doing some market research for one of the lessons we are putting together two thirds of all the people with student loans are between the ages of 25 and 45 years old. This is. That’s generally the demographic especially the upper echelon of that that is the target market for many advisors. It’s also for many of the advisors that are trying to grow their book of business.
Jantz: [00:26:18.63] It’s a tough business to promote and market to people that already have five hundred thousand dollars of investable assets whereas marketing to and growing your book of business with those people that will soon be or in the near future be those individuals with assets is a much easier prelude to establishing those relationships.
Heather: [00:26:38.94] Absolutely and I think some of the advisors who may have been doing it for a really long time without keeping a close eye on the change in the cost of education and the change in the way that education is paid for primarily through debt rather than through scholarships or grants that don’t need to be repaid may have a somewhat outdated notion that families with assets and families with incomes and the potential for wealth or even you know moderately wealthy families they may have the misimpression that those families can pay cash for education like they used to be able to.
Heather: [00:27:33.09] But education gets more and more expensive so expensive now that only the very rich can pay cash as they go. It’s just much much harder to pay for college than it used to be. Those days of saying like I worked my way through college have changed. I mean you just can’t make enough money to pay for college in the way that people used to be able to.
Jantz: [00:28:14.11] And I would add to that when you also look at you know we focus a lot of this demographic where we see two-thirds is between 25 and 40 years of age or 35 to 45 years of age. The fastest-growing demographic with regards to the average balance being held are those older individuals those that are 62 years old and older.
Jantz: [00:28:39.48] And that’s because they have not just potentially their own student loans from their own professional degree but they are also dealing with the debt that they borrowed for their kids to go to school.
Jantz: [00:28:51.3] And now you have some people that have a real conundrum when they’re borrowing for their children they may still have some legacy loans from their own advanced degree and they’re really pushing that the edge of retirement saying how do I balance retirement with student loan payment for my kids for myself. And they didn’t have the money obviously to pay for cash or maybe they did but they chose to put that money in their retirement accounts instead. So there’s another segment here that oftentimes gets overlooked of these parent borrowers or older borrowers that are nearing retirement that is facing a similar issue but less time on their side.
Heather: [00:29:37.65] Yeah. Good point. Jantz another reason for that increase in borrowing among parents as you know is that the federal student loan borrowing limits at the undergraduate level have not expanded at anywhere near the speed of the expansion of the cost of education. So parents can be facing a rude shock when considering financial aid packages for their college-aged children and finding that the sources of. Payment both from scholarship grant and direct to student loan are so limited that it’s just a drop in the bucket. And that really they’re faced with as parents borrowing for the education of their children. Or it’s very expensive very risky.
Heather: [00:30:51.03] Private student loans that are you know not a good alternative. So I think that you know some parents relying on their own experience are finding Oh no. 2 things are different today. And my kid can make ends meet. The way I did.
Heather: [00:31:14.76] So I’m going to need to take on this financial responsibility that I had not fully anticipated right and I think that financial services industry and financial planners have for a long time been providing advice to parents about college planning.
Jantz: [00:31:34.74] But I think that that advice has really been limited towards 529 plans in a way to set the ways to save for college which often is a trade of how they’re spending their dollars are they sacrificing contributions to their own retirement to save for their kid’s college. Or are they saving for their kids you know saving for retirement sacrificing kids college? Most financial advisors that are unfamiliar with student loan repayment and the various student loan repayment options are probably also not familiar enough with the with how to advise a client.
Jantz: [00:32:08.07] That may be forced or facing borrowing for a child’s education because when you have said a married couple with one or two or three kids that are nearing college age and they realize that they’re not going to sacrifice their own retirement for their kids’ education.
Jantz: [00:32:26.34] But they still want their kids to go to college and they end up financing that through federal student loans. Who takes out those student loans between the two parents can also oftentimes be very impactful as to what benefits are available for the forgiveness terms that you talked about before.
Jantz: [00:32:45.52] So so parents that are taking out those loans really need to determine which parent is going to do that borrowing. And one parent may have greater opportunities to access forgiveness than another parent and quite frankly I don’t know of very many advisers out there even those that specialize in college planning that really understands the repayment options enough to help the parent borrowers navigate that Bauer borrowing process with a forward thought of how and who is going to be repaying this loan and in what fashion.
Heather: [00:33:24.61] Right yeah. And the repayment options are one of the most confusing parts about student loans and there’s no lack of confusing things about student loans. But what I mean what are all the repayment plans for federal loans. It’s crazy. You’ve got you to know so-called standard repayment terms which can be between five and 30 years depending on the loan type and the loan balance. So that doesn’t just sound like one standard plan as people might assume you’ve got graduated extended income-contingent income-based one income-based To Pay As You Earn Revised Pay As You Earn. I mean the list is insane.
Heather: [00:34:18.93] And in order to ensure that somebody is in the right plan they have to know what plans are available to them and what the differences are. And this is just simply not the sort of thing that a consumer or even a sophisticated educated intelligent person has the time and resource to be able to figure out on their own. It’s really kind of ideal for a professional advisor that has you know a broad view of the family’s money and their options in order to be able to really come up with a good plan.
Jantz: [00:35:07.44] Right. I mean as we focus here a little bit on the pair of borrowers I would imagine that many if not most of all financial advisers out there have dealt with clients who kids are going to school and those parents are probably accessing parent.
Jantz: [00:35:24.31] Plus loans and I can’t tell you how many times I’ve seen Parent PLUS borrowers come in with six figures or more in student debt but they did things like Well I borrowed for the first kid and my spouse borrowed for the second kid or I borrowed one year and my spouse borrowed one year and then I borrowed. And it really shows the lack of understanding from the parent’s side. But I I’m wagering that most of those parents that are borrowing also have a relationship with some financial advisor that was not well trained not understanding of the repayment options and should have stepped in and provided some advice so that they had more advantageous repayment terms with the structure they put themselves into.
Larry: [00:36:11.77] Sounds like the same kind of I would say a consumer wide problem of lack of having any kind of financial strategy with regard to their spending particularly when it comes to this just loading on the debt and not realizing what they’re into.
Larry: [00:36:29.68] So from all we’ve talked about this is not a set it and forget it thing. Life changes things change your financial features change and to you as a borrower need to have a strategy and the only way you can get a strategy is to continue to monitor your student loans with the help of a financial adviser and recognize too that they’re there may need to change. But another thing that we should touch on here is the loan servicers. And it sounds to me like with all of the changes that can occur. Certainly, the new programs that have evolved over the years and then the issues on the consumer side how prevalent are errors on the loan servicers side. You read a lot about these people these organizations getting heat for various things. Loan Servicer issues and what can I borrow and what can a financial advisor do with respect to dealing with those things or even being aware that they exist.
[00:37:42.28] Well I know Jantz and I both have plenty of horror stories and examples we can share in that regard. Maybe I’ll just cue up some general things about the since the system and Janice can chime in as well. The federal government hires private companies to administer federal student loans and there are many of them the big ones are Navy and formerly known as Sallie Mae.
Heather: [00:38:13.42] There are great lakes now that Fed loan and there are. There are others now. I feel a little charitable towards the serving the servicing institutions on occasion for a minute and so I will say that the system itself incentivizes these services to be efficient and meaning fast and processing things in a very mass way so they have technology and call centers with staff who have scripted replies and they are designed to facilitate transactions with some kind of a typical borrower. End of that typical borrower is going to be someone who finished their education with an undergraduate degree or below. It’s a minority of students that pursue post-graduate education which is when you get into these really high loan balances that get far more complicated. So that’s one reason for it. It’s also that the customer of the servicer is not the borrower because their client is the federal government. So it is much more accurate to think of the loan servicing company as the debt collector in relation to the borrower as opposed to any kind of benevolent you know or even neutral customer service kind of organization. In fact, they are there to collect dollars not to provide you know helpful nuanced specific advice to individuals.
Heather: [00:40:20.35] So yeah they’re widely regarded to be error-prone and to give misinformation that hurts consumers. There’s also totally inadequate oversight of the servicing companies and the third-party collection companies that they use by the federal government. And so borrowers are really in a pickle where they might think that they can trust what their loan servicers say and do. Or they might not know enough about the detail to find errors when they occur. And so it’s really an opportunity for financial advisors to begin by bonding with a client or potential client by acknowledging that that person has likely had a rough go of it before coming into your office. And also it’s important for financial advisors to manage the expectations of clients with regard to service. So you could come out with a fantastic strategy and say OK. We need to do all these things to get your loans situated and then actually carrying that out is likely to take some time and correspondence and sometimes back and forth arguing with a loan servicer before you can get them to actually do it right.
Jantz: [00:42:04.91] Yeah I’ll add to that in my experience it’s been quite challenging working with the loan servicers and certainly set the client’s expectations that there will be challenges with the loan servicers as important. But also I like to make sure that the clients understand that what services the loan servicers can provide is generally limited. They’re not financial advisors. They’re not tax planners. They are really a call center employees and their core competency from a servicing standpoint is collecting money and applying it to the loan balance. The complexity of the income-driven repayment plans has really increased the amount of work that’s required from a loan servicer.
Jantz: [00:42:51.31] And when a consumer or borrower calls this individual they’re talking to a call center employee that’s following a script that is set up for collecting payments and applying payments to loans and record keeping. When we look at these income-driven repayment plans and we’re talking about differences between taxable income adjusted gross income net pay pre-tax contributions and all of the things that we as financial professionals understand can interpret. Into the student loan laws and expect as being processed in the payment and the applications of his income during repayment plans. It’s just something that’s beyond the competency of the loan servicer. So we really have to when working with our clients and working with the loan servicers try to. be understanding of the issues but also understanding of the limitations of the loan servicers and how their policies and procedures work to try our best to fit the documents we’re providing into the format and structure it in a way that fits the way to the box that they wanted to come in.
[00:44:01.08] Let’s move a little bit from this is that there’s a tremendous amount of marketing dollars seem to be being spent through the airways. Radio television it’s targeting the market of consumers who may be having challenges and in particular I’m thinking that from what I’ve gathered there are a lot of people a lot of companies that are trying to just drive consumers into consolidations as the solution or perhaps the other is trying to move to a private loan. What kind of advice can you you give to our public about how to avoid some of these routes. I think I would call them scams for the most part because my sense is that these are not well-trained individuals other than to move to try to move borrowers into one particular product which they’re offering yet.
Heather: [00:45:03.27] I mean if you hear a company referring to themselves as a consolidation firm you know it’s bad because consolidation is one specific thing that makes sense some times and some times doesn’t like it’s really important for a minority of borrowers and it’s harmful to another minority of borrowers. And it’s kind of like the new troll you should probably skip it but it’s not the end of the world if you do it for a lot of people and it is an absolute way to just hire a company and pay them to do a transaction that there is no cost to do. I mean people can consolidate for free anytime they want. The hard thing is to know whether or not to do it and what the consequences are.
Heather: [00:46:10.26] For example like you can lose progress towards forgiveness by consolidating at the wrong time you can lose an opportunity to gain forgiveness by not consolidating specific loans you can cause interest to capitalize and then become interested in bearing principal by consolidating and there’s just way too much to know to hire one of these fly by night companies that have like these you know offshore call centers and they’re just designed to rip off desperate borrowers using fraud and they are all over the place. Then there’s also you know the sort of less prominent problem I would say of you know people relying on professionals that may be excellent in their lane but that have not in fact had the specialized training necessary to be good at student loans and to do those without accidentally making expensive mistakes.
Jantz: [00:47:32.36] Right I mean I think that these these shyster companies have really come from the fact that student loan borrowers have had limited places to turn to get this advice to the loan servicers again are going to stick to what they can have as payments but they’re not going to give him advice about whether or not they should consolidate and I can give advice about how this fits in their plan and how they could reduce payments with certain planning strategies and Department of Education just has websites that are available but most consumers aren’t going to navigate or understand that.
Jantz: [00:48:08.49] So you really end up in this other region and you have your financial services industry and your tax advisors and your financial planners who are really the majority are not knowledgeable in this subject material. And even if they. Very knowledgeable and up until the CSLP certification there was really no way for a student loan borrower to identify which advisors were knowledgeable in the subject matter. So they’ve been left sort of fending for themselves and who’s filled the spaces these private consolidation companies that state attorney generals have done their best to shut them down. But they’re really like. It’s like a game of whack a mole they smash one and another one pops up to the hole next to it. I would say to student loan borrowers that if you’re dealing with anything in your finances I would want to talk to a regulated licensed professional. So the first step would be you know what regulation or oversight is there over anybody that’s talking to me about something in my finances. And then the next step is just because they’re regulated or licensed or have some oversight doesn’t necessarily mean they’re good.
Jantz: [00:49:21.43] So if I can search out a specific designation of a certified financial planner or some cert certificate that says hey this individuals knowledgeable CSLP either knowledgeable in student loan repayment that’s sort of the second step of who I would look for to protect myself from these companies.
Heather: [00:49:42.37] Well and you see Jan that’s why I love hanging out with you because I’ve been doing this stuff a long time. And what I want to do is protect borrowers. I mean I love financial advisors too don’t get me wrong. But that’s not my mission. That’s not my backyard. That’s not my crew.
Heather: [00:50:04.63] What I want is a world in which people can afford higher education even if they weren’t born with a silver spoon in their mouth. And where people who aren’t born into wealth can pursue education borrow to pay for it because unfortunately, that’s the system we have. And then get accurate reliable comprehensive useful advice that they can rely on.
Heather: [00:50:36.67] And until I started working with you and working on the certification there wasn’t a clear path for how a borrower can find that professional you know. I mean you will always need to be careful in who we hire to do things for us. You know we should ask about a person’s education and experience. We should understand how they’re compensated for the work they do. But the beauty of this certification is that that’s a short way that a borrower can look and say OK this person has practiced in a regulated industry.
Heather: [00:51:20.05] This person has passed a rigorous examination demonstrating their competency in this area. They will be offered continuing education so that their knowledge will remain current you know and that’s fantastic.
[00:51:38.11] I mean that’s what student loan borrowers need and their universities and their employers and their loan servicers are not up to the task by themselves. Not at all.
Jantz: [00:51:54.68] I think part of that is student loans as we’ve probably talked about it ad-nauseum here is is complex and it’s confusing and it takes into account other aspects of someone’s life as you mentioned when they get married how they save for retirement how they buy life insurance or health insurance or disability insurance whether they take a promotion at work how they structure their employment compensation.
Jantz: [00:52:19.57] All of these things can factor into their student loan repayment. And it really takes some quarterback really to kind of see all the different moving pieces to help navigate the process and if it it’s difficult for the borrower to do all of that. That’s why they often hire financial advisors for the other aspects of it and it’s difficult for the loan servicer to step outside of their role it’s difficult for the school to step outside of their narrow path.
Jantz: [00:52:50.47] There are bits and pieces that are there but but but without the financial or tax professionals really taking that on nobody has the ability to sort of look at all the different pieces and put it together for the borrower.
Jantz: [00:53:03.34] I would say with regards to the last topic the other you know we talked about the private consolidation companies but a lot of places that are providing information to borrowers regarding student loan repayment including forgiveness opportunities with their private student loans have. Found that the easiest way for them to monetize their advice is to sell private refinances. I can’t tell you how many blogs or Web posts you see where it says don’t do a private refinance but then here are 10 places you can do a private refinance rate below.
Jantz: [00:53:40.44] So you know the historically financial advisors and people, in general, have always looked for a lower interest rate and I think oftentimes the private refinance tease lowest and lower interest rate. That doesn’t necessarily always exist for borrowers. And even if there is a lower interest rate oftentimes it comes with the loss of many federal protections and can cost the borrower more. So anytime someone considers a private refinance it should be heavily scrutinized to make sure that that’s an appropriate decision for them.
Heather: [00:54:12.0] What consumers need is reliable accurate consumer-oriented advice that isn’t driven by lenders seeking profit.
Jantz: [00:54:26.14] Yeah. And you know the go-to for many financial advisors for a long time has been fined a lower interest rate. Pay them off quickly. Pay the least amount of interest and that may not be the best course of action with federal student loans. And I think that you’ll see a lot of financial advisors when they encounter student loans whether it be through their clients or maybe the children of their parents their first go-to thought is going to be can we refinance this many CPA fees for the longest time we’d look at student loans and say Can’t we refinance this into a cash-out refi or home equity line of credit.
Jantz: [00:55:06.0] If the tax code sort of took that to the changing tax code this year took that debt a quiver away if you will or that throw away because that’s no longer deductible whereas the first hundred thousand dollars from a cash-out refire a home equity line of credit was deductible prior to the change in tax code. But that’s sort of been the go-to advice for financial advisors and tax preparers because they’re unaware of what other options exist.
Jantz: [00:55:35.28] So I think that many advisors could be leery if they are encompassing or accounting student loans and saying hey let’s look for a private refinance is their first and foremost thought or let’s look at a cash-out refile because we can get a better interest rate from the homeowner from your home than we can on the student loans without really understanding the comprehensive repayment options that exist. They could be creating a lot of liability for themselves.
Jantz: [00:56:00.6] If something goes awry with that private refinance during repayment.
Larry: [00:56:04.47] Well we’ve covered a lot here in this hour and I’ll make sure that the show notes you’re also on the Web site so people can read the transcript of this as well. So thanks to everybody for listening. As always chance and Heather thank you both. There’s just tons of very valuable information here for everyone in the audience whether you are a borrower or an advisor. And. we hope that it makes a sincere difference in the lives of the borrowers and those who advise them. So thank you guys and we will do this again. In another week.
Jantz and Heather are Board Members and Instructors with the CSLA Board of Standards.