Welcome, financial coaches, to a much-anticipated episode on student loan forgiveness. The topic is intricate and constantly changing. It’s admittedly overwhelming for many of us, including the clients we serve. To shed light on this, I’ve invited David Gourley, a standout alumnus of the Financial Coach Academy®, now a dedicated financial planner for teachers through Teach Plan Retire. David’s transition from teaching to financial planning, especially after becoming a Certified Student Loan Professional (CSLP), has enabled him to guide educators towards significant student loan forgiveness, amounting to over $12 million.

David’s journey, sparked by the confidence and foundation built during his time at the Financial Coach Academy®, exemplifies the transformative power of specialized knowledge and community engagement. His focus has always been clear—supporting educators—yet his approach has evolved, demonstrating the importance of adaptability and persistence in finding how best to serve one’s niche.

Today, we’re having a conversation about student loan forgiveness, motivated by David’s insightful social media post about the recent extension of the IDR Waiver deadline. I hope this discussion helps to clarify some of the challenges of student loan management, making sense of the latest changes and preparing us for the upcoming deadlines.

The following is a condensed version of the podcast episode transcript. Be sure to listen in to the whole episode for more!

Kelsa: Can you explain what FFEL loans are?

David: FFEL loans, or Federal Family Education Loans, represent one type of student loan. Besides FFEL, there are Direct loans, Perkins loans, and several others. FFEL loans were discontinued in July 2010, making Direct loans the primary type currently issued. FFEL loans are unique in that they are privately held but government-backed. For those seeking forgiveness, it’s crucial to convert these into Direct loans, which are government-held, because the government can’t forgive what it doesn’t own.

Kelsa: We’ve touched on Direct loans, but could you clarify the concept of loan consolidation?

David: Consolidation involves combining multiple loans into a single loan. This could be blending old FFEL loans with Direct loans or consolidating loans from different periods. The process aims to simplify repayment, but it’s not universally advisable; it depends on individual circumstances. Importantly, for FFEL loan holders aiming for forgiveness, consolidation is a critical step, as it converts these into Direct loans. The government effectively pays off your old loans and issues you a new, consolidated Direct loan.

Kelsa: What exactly does loan forgiveness entail?

David: Loan forgiveness ideally means the erasure of debt, a goal many aspire to, especially those in the Public Service Loan Forgiveness program. However, there’s also long-term student loan forgiveness, which spans 20 to 25 years. Just recently, I had a client celebrate their long-term loan forgiveness, which shows these programs do work.

Kelsa: Is it possible to have only a portion of your loans forgiven?

David: In the context of Public Service Loan Forgiveness, currently, borrowers should aim for full forgiveness by consolidating their loans to benefit from the longest repayment history. Partial forgiveness should not be common under this program at present. However, future changes might reintroduce scenarios where partial forgiveness becomes relevant again, but for now, the goal should be complete forgiveness.

There have been several different waivers introduced in the last couple of years. The first notable one is the Public Service Loan Forgiveness (PSLF) Limited Waiver. Essentially, the Biden administration recognized that the PSLF program, initiated in October 2007, wasn’t functioning as intended. The program requires 120 qualifying payments, but due to confusion over what constitutes a qualifying payment, many early applicants faced a 99% denial rate in 2017. The reasons ranged from having the incorrect loan type, like FFEL loans, which didn’t qualify, to being on an inappropriate repayment plan, as qualifying payments had to be made under an income-driven repayment plan, and maintaining public service employment during the payment period.

Realizing these issues, the Biden administration introduced waivers to correct past mismanagement and fulfill the program’s original goals. The PSLF Limited Waiver, starting in 2021 and ending on October 31, 2022, allowed for previously non-qualifying payments to count towards the 120-payment requirement. After this waiver ended, the Income-Driven Repayment (IDR) Waiver came into effect, further extending the flexibility introduced by the PSLF Limited Waiver. This new waiver, highlighted in April 2022 but detailed in May 2023, not only continued to acknowledge various forms of repayment towards PSLF but also considered months of forbearance and deferment under certain conditions as qualifying payments. This adjustment is significant, particularly for those who have spent extended periods in forbearance or deferment, allowing these months to count towards loan forgiveness under specified circumstances.

Kelsa: Hearing about loan servicers’ mistakes is both frustrating and a relief. I’ve witnessed the struggle with student loans for over a decade. Clients would follow their plan for 10 years, aiming for forgiveness, only to be misinformed about what payments qualify. Misguided forbearance advice during crucial life changes added to the confusion, making it feel like a game with unknown rules. This has been a nightmare, with diligent clients facing denials and continued payments despite doing everything right. The acknowledgment of these servicing errors, though, does offer some validation for those affected.

David: Absolutely, and the inconsistency from loan servicers, giving different answers to the same question, complicates things further. This isn’t how it should be.

Kelsa: Exactly, and it’s why the recent changes, despite their complexity, are welcome. Understanding the history and adjustments helps us navigate this better. Are there any other terms we should clarify for our listeners to ensure we’re all on the same page?

David: As we delve deeper, more terms will likely come up. Having been immersed in this for three years, I sometimes forget to simplify my language. If anything needs clarification, let me know. Most of this information is on studentaid.gov, but it’s often presented in a complex and hard-to-navigate manner, which is why people turn to professionals like me.

Kelsa: It’s tricky, especially with outdated information on studentaid.gov. So, for someone looking to understand their student loans better, where should they start?

David: The first step is obtaining your Student Loan Data file from studentaid.gov, which is easier said than done due to the site’s security measures. Once you download the file, it’s often a lengthy, difficult-to-read text file. I use specialized software to decipher it, which outlines the entire loan history, including repayments, forbearances, and consolidations. This detailed history is crucial for understanding your situation, but it’s challenging for most people to interpret on their own.

Kelsa: That file contains their loan history, payment records, and changes in loan ownership, right? How can someone make sense of this dense information?

David: Exactly. The file details every aspect of the loan’s history, but interpreting it requires specialized software and knowledge. My software, developed by the CSLP Institute, organizes and simplifies this information, making it actionable. However, for the average person without access to such tools, this task can be daunting.

Kelsa: And this software, it helps you read and make sense of the data file in a format that’s easier to manage?

David: Yes, it’s designed specifically for this purpose by the CSLP Institute. It transforms the complex text file into an understandable format, allowing me to provide accurate advice based on a client’s loan history. Access to this software is one of the benefits of having the CSLP designation.

Kelsa: Wonderful. So, after navigating to that super helpful data file on studentaid.gov, what should someone look for? Let’s dive into some scenarios they might encounter.

David: A key scenario under the IDR waiver involves consolidation, which can extend your repayment history. For example, a teacher who graduated in 2010 and later pursued a master’s degree in 2020 might have loans with different credit counts towards Public Service Loan Forgiveness. By consolidating, even the newest loans with fewer credits can match the older loans’ higher credit count. This is significant, especially when newer loans, typically larger due to being for graduate studies, can be aligned with the repayment progress of older, smaller loans.

Kelsa: And considering the rise in education costs over the years, this could be a major benefit.

David: Absolutely. It’s particularly impactful for those with old FFEL loans and newer Direct Loans. Consolidating them could lead to immediate forgiveness for all loans combined. This scenario is where I find a lot of potential to help clients significantly.

Kelsa: Out of the people you meet, what percentage would you say has little to no options? What’s the worst-case scenario?

David: I’d estimate that 85 to 90% of people could benefit from a student loan consultation. There’s almost always money left on the table, whether it’s finding the best repayment plan or reducing payments. Many don’t realize how much control they have over their payments, influenced by tax filing status, dependents, and contributions to retirement accounts, among other factors.

Kelsa: For someone not immediately qualifying for forgiveness but considering new payment plans, what are the options?

David: The IDR waiver could unexpectedly increase someone’s qualifying credits, even if it doesn’t lead to immediate forgiveness. For new payment plans, the Save program is a recent addition, though not suitable for everyone. Decisions should consider changes in income, family status, and other life changes. The complexity of these programs, like the Save plan’s calculation based on discretionary income, underscores the need for professional advice.

Kelsa: The complexity can be overwhelming. What does signing up for a program like Save mean for someone long-term?

David: Long-term, for those not aiming for PSLF, forgiveness is possible after 20 or 25 years, but it would be considered taxable income at that point. The tax implications vary by state and federal policies, with forgiveness currently tax-free at the federal level until the end of 2025.

Kelsa: Is the taxability of forgiveness a state-by-state matter?

David: Yes, the taxability of forgiveness varies by state, but federally, forgiveness will be tax-free until the end of 2025. After that, it’s scheduled to be fully taxable, emphasizing the importance of understanding both state and federal implications.

Kelsa: Good to know. Okay, I want to clarify something about “credits.” When we talk about needing 120 payments for Public Service Loan Forgiveness, each payment counts as a credit, right? So, 60 credits means 60 payments, and 80 credits mean 80 payments. Is that correct?

David: Yes, exactly. The idea is one month of payment equals one credit towards those 120 needed for forgiveness. People often ask if they can make all their payments upfront, but the PSLF program is designed to encourage a decade of public service. The system doesn’t allow for upfront payments because it wants to ensure commitment to public service roles, not just an upfront payment to escape into the private sector.

Kelsa: What qualifies as public service for these purposes?

David: Public service encompasses a broad range of professions, not just those in education. It includes nurses, doctors in public hospitals, firefighters, police officers, librarians, city and federal government employees, military personnel, and employees of nonprofit organizations, specifically those with a 501(c)(3) status.

Kelsa: How does one’s tax return impact the amount they pay on their student loans?

David: Your filing status, whether married filing jointly or separately, can significantly influence your repayment plan. If you file jointly, your spouse’s income is considered alongside yours. If you file separately, only your income is considered. However, in community property states, this can get more complex, but generally, filing separately might result in a lower student loan payment at the cost of potentially higher taxes, so it’s a balance between the benefits of a lower loan payment and the potential for increased tax liability.

Kelsa: And where do Parent PLUS loans fit into this?

David: Parent PLUS loans can be quite complex. A strategy I often discuss is the double consolidation, which can make a significant difference. For example, I worked with someone who was advised to consolidate their Parent PLUS loans for income-contingent repayment eligibility. This advice was not optimal. A better approach would have been double consolidation, which effectively lowers the monthly payment significantly by changing how the loans are treated, potentially saving a substantial amount over the remaining repayment period.

Kelsa: It’s clear there’s a lot to consider, especially when managing student loans to potentially free up resources for other financial goals or debt repayment. Even if it comes at a cost, moving forward can offer relief and progress from feeling stuck.

David: Absolutely, and I want to clarify that for those pursuing Public Service Loan Forgiveness, the forgiveness is entirely tax-free, both at the federal and state levels, removing concerns about additional tax burdens from forgiven debt.

Kelsa: Yes, thank you for that clarification. This complexity is exactly why I wanted David on the podcast. It’s okay to feel overwhelmed by the nuance and lack of clear-cut answers. I’ve been promoting David’s expertise because individual situations vary greatly, and strategies like double consolidation can be incredibly beneficial for those in specific circumstances.

David: Absolutely. It’s crucial to understand that the Parent PLUS double consolidation is a loophole that will be closed by July 1, 2025. For those with Parent PLUS loans, especially those aiming for PSLF, the timing is critical. The IDR waiver’s deadline and the unique aspects of each case mean there’s no one-size-fits-all solution. Each scenario requires a tailored approach to ensure eligibility for future forgiveness, highlighting the importance of personalized advice.

Kelsa: Over the years, I’ve seen how student loan programs have evolved, adding layers of complexity. This evolution underscores the importance of working with knowledgeable professionals to navigate these changes effectively.

David: The prevalence of scams in the realm of federal programs is a significant concern. I often receive calls from alleged government agencies offering loan forgiveness, which are clear scams. The best defense against such scams is to seek out reputable sources, such as CSLP-certified professionals listed on the CSLA Institute’s website. While loan servicers provide free advice, their guidance has often been less than reliable, making it essential to find trusted advisors who can navigate the complexities of your unique situation.

Kelsa: The advice from loan servicers has frequently been inadequate, to say the least. Finding a reliable source of information and guidance is critical.

David: Indeed. The CSLP community includes both newcomers and seasoned professionals, but my learning curve involved directly working with clients to understand the intricacies of student loans. It’s about finding someone who specializes in your specific needs, whether that’s through direct consultation with me or another expert within the CSLP network, to manage your student loans effectively.

Kelsa: Right, right. Okay, so let’s see. Is there anything else you think people need to know? I’m going to link all of your information in the show notes, and we’ll have you share your details at the end. But before we wrap up, is there anything else about student loan forgiveness you think is important to mention?

David: Most of the crucial points have been covered, but I want to emphasize that there is hope for people, whether you’re working towards public service loan forgiveness or just dealing with student loans in general. One aspect of the SAVE plan worth mentioning is that there’s no interest accrual once you’re enrolled; the government subsidizes it. So, your balance won’t grow, which is significant for those in the public service loan forgiveness program. There are mechanisms in place to help, though they may seem small steps towards improving the overall student loan landscape. Addressing the interest rates directly could provide more immediate relief. But, there are opportunities and strategies to reduce your student loan payments and take advantage of existing waivers. However, be aware of upcoming deadlines. There’s talk of extending the current April 30 deadline to mid-summer, though it’s not guaranteed. If you think you might qualify for something, it’s wise to start looking into it now.

Kelsa: Why wait, indeed. Clarity on your plan and timeline can offer hope. Last week’s announcement about loan forgiveness for some borrowers might give the impression that no action is needed to benefit from these programs, but that’s not the case for most. It’s crucial, especially for public service loan forgiveness, that you do need to take steps to qualify.

David: Absolutely. For public service loan forgiveness, the bare minimum is submitting a PSLF application through studentaid.gov. Proactive steps are necessary.

Kelsa: Thank you. David, as my guest, I’d love to answer any question you might have for me today, perhaps about coaching clients or anything from the coaching space?

David: I have many questions, but I’ll focus on one. For those considering or having gone through FCA, which was invaluable for me, I’m curious about any tips or strategies to enhance my coaching conversations with clients about student loan planning and forgiveness.

Kelsa: It’s vital to recognize the emotional aspects clients bring to these discussions, not just bombarding them with information. Identifying any hesitations they have allows you to address those directly. Whether it’s feeling overwhelmed, ashamed, or guilty about seeking forgiveness, understanding their emotional state can guide the conversation. Post-application, consider a program to help clients seize the opportunity, planning what they’ll do and how they’ll feel once loans are forgiven or if they’re working towards forgiveness. Coaching in this context means helping clients leverage this opportunity without letting your judgments influence the advice given. Regardless of personal views on student loan forgiveness, it’s a program that exists and can significantly impact clients’ lives.

Kelsa: What’s the best way for people to reach out to you or find more information?

David: You’ll find all my information in the show notes, but the link tree is the easiest way. I’m also active on Twitter or X as DavidG_CSLP, and on LinkedIn, where I share updates, client wins, and strategies for navigating student loans and current waivers.

Kelsa: Thank you, David, for joining the show and sharing your insights on the complexities of student loan forgiveness.

David: Thank you for having me. It’s been great to reconnect with the FCA community.

Kelsa: Up next, we’ll explore how to price your periodic coaching program. Financial coaching is incredibly rewarding, and if you’re ready to learn more, check out financialcoachacademy.com for our programs, free trainings, and events. Subscribe, rate, and review if you enjoyed this podcast, and see you next week.