There are roughly 45 million people drowning in nearly $1.6 trillion in student loan debt (Source: Forbes.)That’s an average debt of more than $35,000 per person! If you are one of those 45 million people, your student loan payment is probably more than a car payment. And it might be as much (or more) than a mortgage.
Since student loan debt is a burden for many nonprofit professionals, I invited Meagan Landress to help us better understand how to manage student loans. Megan is a financial planner who specializes in student loan debt, and she shares tips for reducing your monthly payments and maximizing the debt-forgiveness program available to nonprofit staff. So listen in and sleep sounder tonight!
Listen to the Episode Here!
Website: Federal Student Aid
Website: Student Loan Planner
Website: Financial Coach Meagan
Podcast: Episode 86: Offering Employee Benefits Your Team Will Love with Liz Frayer
(03:06) Public Service Loan Forgiveness program
(11:49) CARES Act student loan relief program
(16:28) Consolidating your loans
(19:54) Working with a student loan planner
Dolph Goldenburg (0s):
Welcome to the Successful Nonprofits® podcast. I’m your host, Dolph Goldenburg. Today, we are bringing you a conversation about student loans and what you can do about yours or your children’s. And the conversation is going to be with Meagan Landress. Before we do that, I want to remind you a lot of organizations are looking out beyond 2021 to 2022 and 2023 because we can now see more clearly. If you’re interested in strategic planning at any point in 2021, reach out to me. My schedule typically fills up about three to four months in advance. We should definitely have a conversation now if this is something you want to be working on in 2021.
Dolph Goldenburg (41s):
Now let me introduce our guest to you, Meagan Landress. I was so impressed when I read her bio because she nonchalantly says that she became interested in finance when she had a part-time bookkeeping job in high school. I know very few high school students ready to manage money, but literally someone was paying her to be their bookkeeper. That speaks volumes, when you realize she had not yet really gotten bookkeeping credentials.
Dolph Goldenburg (1m 23s):
Meagan went on from being a part-time bookkeeper to college, got a degree, and did an internship with a financial planner. She then dug down deep into student loans because she realized that is an area where so many people need help with their financial planning. So over the course of her career, she has helped over 500 people tame the student loan monster – over $6 million of debt. I am so excited to bring her on because this is a topic I know very little about.
Dolph Goldenburg (2m 7s):
I am probably the last generation that went to college when it was affordable. My entire undergraduate and graduate education combined costed less than what a Toyota Corolla costs today. And that allowed me to work full time and do a pay-as-I-go plan. So, I got out of school with $1,800 in student debt that I paid off in a year and a half. That’s not the case for most people today. I know tons of people, people that go to school in-state, that leave with five or even low six-figure student loan debt. And that’s an albatross that hangs around them. That’s why I think this conversation with Meagan is just so important. Meagan, welcome to the podcast.
Meagan Landress (3m 0s):
Thank you so much for having me. I’m looking forward to nerding out on this topic with you.
Dolph Goldenburg (3m 6s):
Same here. This is a topic I don’t know a lot about. So, I know that I’m going to just learn a ton through our conversation. Where I want us to start, because the vast majority of our listeners work in the nonprofit sector, is the federal forgiveness program. There are a lot of myths and fears about that program. Can we chat about the program?
Meagan Landress (3m 29s):
You’re absolutely right. There’s a lot of nervousness around PSLF. It’s called Public Service Loan Forgiveness, and it is the federal forgiveness program for federally held loans. A lot of that nervousness comes around the fact that it is a newer program. It was enacted in 2007. The first time we could have seen anybody get forgiveness is 2017. From that perspective, it’s newer and there are some technicalities that we need to comply with to achieve it.
Dolph Goldenburg (4m 1s):
I know very little about student loans. All of our listeners may already know the answer to this question, but if someone acquired their student loans before 2007, are they still eligible for this program?
Meagan Landress (4m 15s):
They could be as long as the loans are the correct type. They need to be direct loans and payments on those loans will not count prior to October 1st, 2007.
Dolph Goldenburg (4m 28s):
I know a lot of our listeners went to school before 2007. So, that’s really gratifying to hear. What else should people know about loan forgiveness?
Meagan Landress (4m 37s):
First, it’s attainable. I think there’s a common misconception that you can’t get PSLF forgiveness. You can. You just have to make sure you’re checking the five requirements to achieve that forgiveness.
Dolph Goldenburg (4m 49s):
Let’s check those off now for our listeners because I’d be willing to bet there are other people like me who know little about it.
Meagan Landress (5m 1s):
First, we have to be working in public service and paid by that entity. Any government entity, nonprofit, and 501(c)(3) entity qualify. Second, you have to work full time. That’s 30 hours on average or more, unless the employer has a different definition. At that point, you’d need to work their full-time definition. If you had two part-time positions at two different nonprofits and the hours added up to 30 or above, that still qualifies. I think that’s something people don’t know either and could be positive if you’re splitting your time between two different entities.
Meagan Landress (5m 41s):
The third is you have to have the correct loan. Direct loans qualify for forgiveness. And only federal loans, not private. Then the fourth requirement is to be on an income driven plan for repayment. There are four types that you could have access to. And finally, the last requirement is making 120 qualifying payments. A qualifying payment is one that’s made where all four previous requirements exist at the same time, and a payment that’s made on time and in full. 120 payments shakes out to be about 10 years. If you’re consistent with your public service work.
Dolph Goldenburg (6m 17s):
Let’s unpack some of this. The first point you said was that you have to be working for an eligible employer, like a 501(c)(3). If your organization outsources that to a PEO – professional employer organization – that is a for-profit, are you immediately disqualified?
Meagan Landress (6m 35s):
It depends. What you have to do is complete an employer certification form. I would suggest doing this if you’re not sure if they qualify or you think they don’t. Go ahead and just fill this out and find out for sure. On this form, you put your employer’s information, the EIN number for the employer itself, and then someone from HR or your direct supervisor will sign off on it. If they come back and approve that form, then you’re good to go. The ECF form is the best way to confirm whether you could qualify.
Dolph Goldenburg (7m 12s):
Would you recommend people complete that form with their employer and send it in now?
Meagan Landress (7m 19s):
Yes. It will always be retroactive anyway; they don’t continue to count payments up for you. It’s always going to look back on the dates you are certifying. So, you’re not missing out if you haven’t submitted it yet. But it’s best practice to submit it sooner rather than later. So that everybody is on the same page with how many payments you have going towards that 120 threshold.
Dolph Goldenburg (7m 44s):
I’ve got to ask this question for those of us that are at nonprofits hiring people. Are we able to say to prospective employees that we are a qualifying organization for loan forgiveness?
Meagan Landress (7m 59s):
Yes, you could. And that is attractive to talent these days. If that’s a benefit they’re looking for, that’s something that could be a big positive to them.
Dolph Goldenburg (8m 14s):
Is there any documentation that a non-profit needs to fill out to say they are a qualifying organization for forgiveness?
Meagan Landress (8m 24s):
Not necessarily. That entity has to be filing taxes as a public service entity. If you’ve lost status, then that might be a problem. But if you’re in good standing and you’ve been filing taxes as public service, you should be fine.
Dolph Goldenburg (8m 40s):
That’s awesome. Can we talk for a minute about the four income related repayment options?
Meagan Landress (8m 51s):
Yeah. So there’s four different income driven plans, or IDR. They are based on 10, 15 or 20% of your discretionary income.
Dolph Goldenburg (9m 7s):
If I was thinking about getting loan forgiveness, why would I go for a 15% IDR as opposed to a 10% IDR? Or does the government decide which one you’re eligible for?
Meagan Landress (9m 21s):
Your loans and when you borrowed will decide which one you’re eligible for. Anybody could have access to the 10% or one of the 10% plans. The downside to that plan is that it factors in spousal income, if you’re married. So there’s some strategy where a 15% plan could be better because that allows you to exclude spousal income.
Dolph Goldenburg (9m 54s):
Well, this doesn’t sound very romantic, but do people ever consider student loans when they’re deciding whether they’re going to get married?
Meagan Landress (10m 2s):
They do. I would say that is a common conversation that’s had now before engagement or during engagement. People want to talk through how they’re going to impact each other. It’s not so much an issue when both spouses have student loans and they’re both on an income driven plan because they’ll have a household payment that is split proportionately between each spouse. I think more of the anxiety comes around when one potential spouse has debt and the other doesn’t. Then you have to have those conversations about whether or not the spouse is going to help with payments or will the couple file separately. But it’s not something to be scared about. I tell people that all the time, it’s just something we need to know about and have a plan for. So we can pivot when that time comes.
Dolph Goldenburg (10m 57s):
I know many people do premarital counseling, like relationship counseling. My husband and I did that and I could not recommend it enough. It sounds like maybe people should be doing premarital financial counseling as well.
Meagan Landress (11m 9s):
100%. I am totally down for that. I think it should be required.
Dolph Goldenburg (11m 17s):
Do you do much of that as a financial counselor?
Meagan Landress (11m 20s):
I think that’s a driving factor when people schedule a call with someone like me. Marriage is a big one. Having kids is another big one. Interestingly, COVID has been a big one because people have been able to slow down, think about their situation and decide to take a closer look at this.
Dolph Goldenburg (11m 49s):
Speaking of COVID, I understand there’s also a CARES Act student loan relief program. Can you say a little bit about that?
Meagan Landress (11m 59s):
The CARES Act was implemented on March 27th. It was a stimulus package to help America with the COVID-19 pandemic. There was student loan relief included in that package. Currently, interest is frozen or 0% for all federally held student loans and payments are paused. It was originally until September 30th, but it has been extended to December 31st. Payments for federal loans are not going to be required until 2021. The best part for people in the nonprofit or public service space is that these months still count towards forgiveness timelines. Even without making a monthly payment, these months still count towards that 120 payment threshold.
Dolph Goldenburg (12m 54s):
So as long as you’re still working for that nonprofit employer, even if you’re not making payments, it counts?
Meagan Landress (13m 2s):
You still have to be working full time for that public service entity, but yes, these months count.
Dolph Goldenburg (13m 9s):
That is an amazing deal because that’s money in your pocket today and you’re forgiven at the end of your 120 months of pay.
Meagan Landress (13m 19s):
Yes. So, there is literally no incentive for someone who is working towards forgiveness to be paying right now. It doesn’t speed up your timeline. That money is better put towards literally anything else.
Dolph Goldenburg (13m 33s):
So if we have listeners who are currently paying their student loans and want to take advantage of this, how do they do that?
Meagan Landress (13m 41s):
Everybody’s auto drafts were shut off. You were actually forced into forbearance back in March. So you don’t have to be making payments and you can’t be auto debited right now. If you have been making payments intentionally, which people may have been, you can request a refund as far back as March 13th. I talked to someone recently where they had been making payments since March and her payments are not small. I told her she could ask for a refund because the months still counted. She was really excited about that.
Dolph Goldenburg (14m 16s):
Roughly, how much was her total refund?
Meagan Landress (14m 23s):
So, she was working in a nonprofit hospital as a physician. So it was going to be about $10,000 that she was getting back.
Dolph Goldenburg (14m 29s):
Wow. I have to say that makes for a much better end-of-year for her and her family.
Meagan Landress (14m 39s):
I think she dropped a lump sum on it too. There is that common misconception that if you pay extra on debt, then that’s a good thing. It’s not a good thing if we’re pursuing forgiveness because it doesn’t speed our timeline up and puts us into what is called paid ahead status. If we don’t have a required bill the next month, then that month will not count. So we shoot ourselves in the foot. But she was able to get all that back and her status corrected.
Dolph Goldenburg (15m 11s):
I think you had mentioned that the CARES Act is only for federally held student loans.
Meagan Landress (15m 19s):
Correct. That really shined a light on the different federal loans you could have, which originally didn’t matter so much unless you were pursuing PSLF. Folks could have what’s called FFEL loans, or Family Federal Education Loans. Those have never qualified for PSLF. People pursuing PSLF either have consolidated those or converted them into the correct loan. Those loans were issued prior to 2010 and they don’t issue them now.
Meagan Landress (16m 1s):
And they could have been either held commercially or federally. So the federally held FFEL loans have payments shut off, but the commercially held loans don’t. They are treated as private loans, even though they’re still under the federal loan umbrella. So the CARES Act did shine a light on the difference between a federally held federal loan, and a commercially held federal loan, which at one point didn’t really matter.
Dolph Goldenburg (16m 28s):
Is it possible to convert a commercially held loan into a federally held loan?
Meagan Landress (16m 35s):
It is. You can do a process called consolidation, which I think sometimes gets confused with refinancing. Those words are not the same thing. Consolidation means you just combine or convert that loan code into a direct consolidation loan, which qualifies for forgiveness. It changes it from commercially held to federally held.
Dolph Goldenburg (16m 58s):
I’m sure we probably have a lot of listeners that have some commercially held loans because they’d refinanced. If they’re able to convert it into a federally held loan, is there any reason they wouldn’t pursue that?
Meagan Landress (17m 10s):
Yeah, that’s a good question. So if they’re pursuing forgiveness, there’s no reason you shouldn’t because those payments you’ve been making on the FFEL have not been counting towards the 120 payment threshold.
Dolph Goldenburg (17m 24s):
If someone were to convert it now, essentially the first payment on the federally held loan would be payment number one, and they’d have 119 more payments.
Meagan Landress (17m 34s):
Yes. And you don’t have to consolidate all of your loans. Some people have a couple FFEL loans and the rest are direct loans. They have some qualifying payments on those direct loans. You do not have to consolidate them all. You can just consolidate the two or three FFEL loans and that preserves your payment history on the ones that were in good standing. I think that’s a good move.
Dolph Goldenburg (18m 7s):
If you’ve got the commercially held loan and you have less than 10 years of payments left, it doesn’t make sense to consolidate. You should just repay. You’re on schedule for the commercially held loan. Is there still a reason they would consolidate and move over?
Meagan Landress (18m 24s):
It depends. I think there is a point, where you might treat it like a debt going forward. If the balance is low enough, there might be a more efficient way to pay it off versus an income driven plan. But if someone’s balance is large enough or they have to start from payment zero, it could still make sense to pursue that. It’s unfortunate. If you thought your payments had been counting for years and they haven’t, there’s still an opportunity to get it on the right track.
Dolph Goldenburg (19m 2s):
I would imagine most people are confused by all the different plans and options. So, I would imagine the best thing to do would be for people to reach out to someone like you.
Meagan Landress (19m 15s):
The system is so unfortunately complicated. You do have resources through studentaid.gov. There’s a PSLF help tool, which will help you identify whether you have the correct loan type. That could be a good first step. Navigating which repayment plan you should jump on, what’s most strategic, or how you should file taxes, that’s where a planner can come in and that’s not something your servicer or student aid is going to help you with.
Dolph Goldenburg (19m 54s):
For folks that are interested in working with a planner to help them navigate. How does that work? Do they pay the planner a set fee? Does the planner get a commission when things are consolidated? How does that typically work?
Meagan Landress (20m 18s):
In the student loan planning world, I think it’s straightforward. We charge a flat fee depending on your debt level that comes with the consultation and six months of email correspondence to make sure the plan is up and off the ground. And I think that could be what you expect running into any certified student loan professional.
Dolph Goldenburg (20m 58s):
What should people be budgeting if they’re interested in hiring a student loan professional?
Meagan Landress (21m 3s):
Our pricing ranges from $395 to $595, and that is based on debt level. If you have under $200,000, you’d be at the $395 level. If you have over $400,000, you’ll be at the $595 level. It is by debt load.
Dolph Goldenburg (21m 29s):
I just have to reflect as someone who has a paid financial planner, that’s a bargain. Now, do you do other financial planning when you’re working with them around student loans? How do you help individuals understand how the student loan fits into their long-term financial and retirement planning?
Meagan Landress (22m 0s):
That’s a great question. In our student loan planning consults, we discuss how saving for retirement impacts the plan. I think the hard part of student loans is that we’ve been taught debt is bad and we need to pay it off. But with forgiveness, that’s not the right approach. Our goal is to pay as little as possible to maximize how much we can get forgiven. We talk a lot about how to reduce AGI to reduce that payment. You do that by contributing to pre-tax vehicles like retirement or HSA. We’re not CPAs, but we do talk about tax filing strategies. In addition to that, I have my own financial coaching practice where I help people organize the rest of their financial life. That’s a little more in depth where we’re walking through saving, cash flow, other debt, emergency savings, income protection, and protection of your financial plan. I think you get a taste of it in a student loan planning consultation because student loans touch so many pieces of your financial plan. But if you’re working with a coach or financial planner, then they’ll dive in a little deeper on other aspects of your finances.
Dolph Goldenburg (23m 33s):
Very cool. I’ve not thought about it, but it makes sense. If the income driven repayment is based on your adjusted gross income, suddenly it incentivizes people to save as much as possible for retirement because it lowers their monthly student loan payment. I had not thought about that, but what a great incentive.
Meagan Landress (23m 51s):
Yeah. That’s what I say, too. If you want to add another incentive other than great financial independence, it’ll reduce your student loan payment.
Dolph Goldenburg (24m 1s):
And what a great favor you’re doing for your future self. Not only are you finding ways to help in 8 or 10 years when it gets forgiven, but also to help your future self when you retire. I just love that.
Meagan Landress (24m 16s):
They’re cohesive, and they work together to do different things, but overall for your benefit.
Dolph Goldenburg (24m 21s):
Meagan, I am so grateful that you came on again. I know nothing about student loans, and you have taught me a ton. I hope that our listeners have gotten as much out of it. I hope our listeners that have student debt have realized that there might be some ways for them to manage that student debt. I can’t let you go without asking you the off-the-map question. I think I got a good one for you because I understand you used to do mud runs, like Spartan Race and Tough Mudder, and suddenly you just stopped.
Meagan Landress (25m 5s):
Yeah, that’s true. I used to do Tough Mudder’s Savage race. There’s a lot of them that come through Georgia. But I worked at a financial planning firm and we worked with federal employees at the CDC because Atlanta is a big hub for CDC employees. We had a client who was in some kind of infectious disease section of the CDC.
Meagan Landress (25m 50s):
I was talking about the Savage race I was going to participate in that weekend. And he was like, “Oh, be careful at those.” And I was like, “Why?” I was thinking he was going to say, “You could get hurt or slip or something.” And he was like, “We traced a couple cases back to mud runs where someone must have cut their leg. People were rolling around in the mud and they all got this illness.” And I was like, “Oh my gosh, that is terrifying.” I have not since done one because of that conversation. I was thinking about all the other things that could be in that gross mud that I’m rolling around in.
Dolph Goldenburg (26m 36s):
It’s interesting because we both live in the Atlanta area and I have a friend who works for the CDC in their food-borne illnesses division. About four or five years ago, I was talking to her about going to a restaurant, and she said, “Oh, I almost never eat out. Let me tell you about some things we have traced back to restaurants.” She got to point number two, and I just had to say, “Mary, stop. I’m not going to stop eating at restaurants. And I don’t want to be skeeved out.”
Meagan Landress (27m 9s):
There’s some bliss in ignorance.
Dolph Goldenburg (27m 15s):
Exactly. It’s funny because I’ve done some of those mud races. I really never thought about that as one of the possible downsides. But now that you said it, I could totally see it.
Meagan Landress (27m 27s):
Yeah. I get how it could happen. So, if you’re doing those, be careful and make sure you don’t have any open wounds.
Dolph Goldenburg (27m 37s):
I would also say that’s one more reason to wear spats and a rash guard that goes all the way to your wrist. You’re probably just less likely to get a scratch or cut yourself.
Meagan Landress (27m 46s):
Yes, exactly. And don’t open your eyes under the muddy water.
Dolph Goldenburg (27m 50s):
Totally agree with that. That is disgusting. Or open your mouth.
Dolph Goldenburg (27m 56s):
Meagan, thank you so much for joining us today. I am so grateful you came on. I want to make sure that our listeners know how to get ahold of you and the organizations you work with. The first URL is studentloanplanner.com. And the second URL is Meagan’s own financial consulting practice, which is financialcoachmeagan.com. If you are interested in figuring out how to better deal with your student debt, either of those two are great resources. Make sure you reach out to Meagan. She can help you figure it out.
Dolph Goldenburg (28m 44s):
Those websites have great blogs. I have read a number of articles on both. At studentloanplanner.com, you can also access their podcast. I know you’re a podcast listener, so make sure you go up there. Meagan, thank you again for joining us today.
Meagan Landress (28m 59s):
Thank you. This was a good time. Hopefully, we gave some listeners some good info and didn’t give too many heart attacks. There is a plan. Don’t be scared of your student loans.
Dolph Goldenburg (29m 13s):
If you are just logging into that Tough Mudder race you paid for to see what the refund policy is, no worries. Keep on trying to figure out that refund policy. You can put the refund toward your student loans and you can get the URLs we mentioned in the show notes at successfulnonprofits.com. And don’t forget, if you are interested in strategic planning for your organization, reach out to me. You can find me at successfulnonprofits.com.
Dolph Goldenburg (29m 46s):
Finally, if you enjoyed this episode, I would suggest that you check out Episode 86 – offering employee benefits. If we’re talking about student loans, employee benefits are something important to be talking about as well. Do not forget to rate, review and subscribe to the Successful Nonprofits® Podcast on your streaming app of choice. Listeners, I hope you have gained some insight to help your nonprofit thrive in a competitive environment.
Dolph Goldenburg (30m 22s):
I am not an accountant nor an attorney and neither I nor the Goldenburg group provide tax, legal, or accounting advice. This episode is for informational purposes only and should not be relied on for tax, legal, or accounting advice. If you find yourself in need of such counsel, please reach out to a licensed, competent professional and get the advice you need.
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