Episode 98 Transcript

[00:00:00] Evon: Hey, everybody. Welcome back to The Optometry Money Podcast, where we’re helping OD’s all over the country make better and better decisions around their money, their careers and their practices. I am your host, Evon Mendrin, Certified Financial Planner(TM) practitioner, and owner of Optometry Wealth Advisors, an independent financial planning firm just for optometrists nationwide. And thank you so much for listening. This episode’s going to be pretty short and sweet. We have a pretty big student loan update coming out of the weekend here, just recently announced by the Department of Education.

[00:00:37] And the Department of Education announced that for federal loans that are on income driven repayment plan, the pause for income recertification has been extended. Into September, 2024.

[00:00:53] Meaning that the earliest that any borrowers on income driven repayment plans will be required to recertify or reshow, their updated income information and family size will be late September 2024 at the earliest.

[00:01:10] And. Just to give it some background during COVID. There was the payment freeze, obviously, a freeze on federal student loan payments and interest as well as a recertification.

[00:01:21] And. That recertification freeze was set to end on March 1st of this year, 2024. Meaning that if your recertification date or anniversary date for your income driven repayment plan was before March 1st of this year, it was going to be pushed out a year to 2025. And if your recertification date was after March 1st, on after March 1st of this year, you would have had to recertify, you would have had to reshow your updated income information. For the first time in years, potentially. I mean, potentially since 2019 or so. Right. So there are a lot of borrowers, a lot of optometrists who graduated j ust before COVID or graduated during COVID and had their payments based on pretty low income.

[00:02:09] And you’ve basically been able to ride that recertification freeze and ride that low IDR payment for the last couple of years.

[00:02:16] And so this extension now moves that moves that deadline from March 1st, 2024 to late September 2024 at the earliest.

[00:02:26] And there’s speculation on what the election in the fall of 2024, whether they might extend that even further into 2025. But, as far as we know, that’s what we should expect.

[00:02:36] So if you’re on an income driven repayment plan already, the earliest that you should expect to be required to reshow your income again is late September 2024.

[00:02:47] What if your anniversary day your recertification date is before September, say August or July of this year? What happens then?

[00:02:56] Well, what they’ve done in the past is that they’ve pushed off that recertification date for another year. So for another 12 months. So if they’re going to be doing that again, my assumption is that your recertification date will be pushed off into next year, 2025. So if it was supposed to be July of this year, my assumption is that it will probably be July of 2025, but I’m going to keep an eye out for that until we see confirmation of that, but I I’m assuming that’s how it will go because that’s how they’ve handled it so far. And as we get closer to September, what should you expect?

[00:03:31] Well in the announcement student aid.gov has really laid out the timeline of what they’re going to expect. And three months before the date that you need to recertify your servicers, going to reach out to you. 35 days before your recertification date is when you’re income information is going to be due. So that’s, that’s the deadline to submit that recertification. And then 10 days before is the last state that you can turn in income documentation. So tax return, pay stubs, whatever it might be.

[00:04:00] Right? So these are important dates you need to keep in mind.

[00:04:02] What if you’ve already re-certified because you thought your recertification date was in March. A lot of borrowers I’ve I’ve had some clients that, had recertification in March, received notification early in the year and went through that recertification process already. So what happens then if you’ve already done that?

[00:04:20] Well, If your payment went up, your servicer should be returning your payment back to its previous monthly amount. What if you re-certified and your payment went down or stayed the same? Well, if it went down there, actually isn’t going to be any changes to your payment. They’re going to allow you to keep that same lower payment. So overall, this seems to be a benefit to borrowers. The deadline to recertify has been pushed off. And if you’ve already recertified, you should see that brought back to the lower amount.

[00:04:51] Hopefully this allows you to have a little bit more breathing room and a little bit more time on a lower payment.

[00:04:56] And, and what if you have lower income? Well, if you have lower income, you’re expecting a lower payment because of that, it may make sense to simply recertify and get that lower payment for the next 12 months.

[00:05:07] You need to consider what it would be to stay on the current plan you’re on and keep the payment that you have and compare that to the payment you would receive if you change to another plan, like SAVE or Pay As You Earn.

[00:05:19] What if you need to change repayment plans? Well, if you need to change your payment plans, You need to consider the options. So just the general announcement here just wanted to make sure everyone was aware of that.

[00:05:29] Again, if you’re on income driven repayment plans. , the first date of what you’re going to be required to recertify, or reshow your income has been pushed off into the fall of 2024, Late September at the earliest. And we’ll just keep an eye on, as late September comes up, to see whether that’s going to be actually that same date or whether it’s going to be extended into next year. We’ll just keep an eye on that.

[00:05:52] But just another example of the federal student loan landscape, always changing, always something to keep up with.

[00:05:58] I also wants you, remind you, or just make sure that you are aware of, of a couple of really important federal student loan deadlines coming up this year.

[00:06:06] The first one is the July 1st deadline to hop onto the Pay As You Earn repayment plan. So, if you’ve done the math and you’ve looked into your different repayment plan, you’ve decided that a Pay As You Earn and it’s 20 year forgiveness timeline makes the most sense for you. You have until July 1st of this year, 2024. To be on the Pay As You Earn repayment plan. After July 1st comes and goes, you’re not going to have access to that plan anymore, unless you’re already on the plan.

[00:06:36] They’re not going to kick you off of it. But if you are intending to be on that plan, long-term you need to be on it before July 1st of this year. Right? So that’s a really important deadline. That’s especially important for those borrowers who. Who took out their first loans after 2007, but, But before 2014, it’s that window of borrowers that aren’t going to be eligible for the new Income-Based Repayment plan, which is almost exactly like PAYE so you’re not eligible for that new income-based repayment plan.

[00:07:07] Your only option as an income driven repayment plan for 20 years forgiveness timeline is PAYE. So it’s really that group of borrowers where this deadline is, is most important. A lot of the OD’s I’ve seen in that window or are trying to decide, does Pay As You Earn, make sense with 20 years until forgiveness, or does the SAVE plan make sense with 25 years forgiveness?

[00:07:28] And that’s ultimately something you just kind of have to weigh the math on, but, that’s the first really important deadline.

[00:07:34] The second really important deadline to keep an eye on is. The one time income driven repayment account adjustment, happening. Now this year. And basically what’s happening is Over the last year or so. The Department of Education has been updating your payment counts toward forgiveness, both taxable forgiveness and a PSLF. For a really broad range of reasons. They’re giving borrowers credit towards any amount of time on any repayment plan.

[00:08:00] I mean, it’s, it’s a really broad. Amount of of credit they’re giving towards forgiveness. Trying to basically fix the ways that borrowers could accidentally lose credit or payment counts. So. They’ve been applying these, payment adjustments and some borrowers, either need to, or will benefit from consolidating your federal loans. Of one example is that if you have any FFELL F F E L loans, instead of Direcdt federal loans, You’re going to need to consolidate those FFEL loans into a Direct consolidated loan. In order to benefit from that one-time account adjustment. If you have overlapping loans with overlapping payment history, you may benefit from consolidation because it might give you full credit for the oldest loan for all of your federal loans.

[00:08:50] So there’s certain situations where you either need to consolidate your loans, or you could benefit from consolidating your loans. And the deadline to do that consolidation was actually December 31st, 2023, but just before the end of the year, that was extended now to April 30th of this year.

[00:09:08] Which means you have a deadline to get that consolidation started by the end of April of this year, 2024 in order to benefit from that one time IDR account adjustment. And this is a really, this is really big news for those that it benefits.

[00:09:23] I mean, this can give potentially a substantial amount of months and years towards, towards forgiveness. Where otherwise it was accidentally missed. So. Keep an eye on that. If you have any questions, reach out to me at podcast@optometrywealth.Com.

[00:09:38] You can check out all the links and resources to everything I talked about today in the show notes, which you can find at the education hub at my website, www.optometrywealth.Com.

[00:09:47] And while you’re there, if you’re curious about what it looks like to work together with Optometry Wealth Advisors on your own student loan and financial planning and solving the biggest financial questions on your mind. You can. Schedule a no commitment introductory call, and we can talk about what’s on your mind financially, and I can share how we help optometrists all over the country navigate those same questions and more. And appreciate your time. We’ll catch you on the next episode. We’ve got some great episodes coming up. For example, about creative ways to structure practice transitions and more. So we’ll catch you on the next episode. In the meantime. Take care.