Women's Money Wisdom

Episode 302: Student Loans in 2026: What’s Changing and What You Need to Do Now with David Gourley

• Melissa Joy, CFP® • Season 4 • Episode 302

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Student loans aren’t just a financial obligation — they’re a moving target. Rules shift, repayment plans evolve, forgiveness programs get redefined, and big deadlines are on the horizon. To help make sense of it all, Melissa Joy, CFP®, sits down with student loan expert David Gourley, founder of K-12 Planning, to break down the latest changes and what they mean for borrowers today.

David brings deep expertise from years of helping educators, public service professionals, and families navigate the student loan maze. Together, Melissa and David walk through what’s stable, what’s shifting, and what borrowers need to pay attention to right now — especially as 2026 brings some of the biggest changes we’ve seen in years.

They explore why Public Service Loan Forgiveness remains intact (despite the headlines), the critical steps Parent PLUS borrowers must take before federal doors close, and how the upcoming Repayment Assistance Program (RAP) could reshape long-term planning for millions. David also shares the little-known strategies around tax filing, repayment timing, and consolidation that can dramatically change someone’s loan trajectory.

Highlights include:

  • Why PSLF is not going away — and who still qualifies
  • How adjunct professors can use a multiplier to qualify as full-time
  • The crucial July 1, 2026 deadline for Parent PLUS consolidation
  • What RAP is, how it compares to IBR, and why timing matters for borrowers
  • How long-term forgiveness works (20, 25, or 30 years) — and when it may be taxable
  • How filing taxes married filing separately can significantly reduce payments
  • The risks of relying on lower payments when interest continues to grow
  • What changes to borrowing limits mean for grad students and parents
  • When refinancing to a private loan may actually make sense
  • How to plan ahead when student loan rules continue to evolve

If you’re navigating repayment, planning for forgiveness, or preparing to send a child to college, this conversation offers clarity in a landscape that rarely stands still. Melissa and David bring the context, strategy, and grounded perspective borrowers need to make confident decisions — today and in the years ahead.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

SPEAKER_01:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Perl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. And so today, because this topic is ever evolving, so complex, so many things to consider, so much future forecasting as well, which is very difficult to predict and very unpredictable. We're going to be talking about student loans with a personal finance expert who loves to dive deep into student loans. So my guest today is David Gorley. David is a former teacher and he turned into a financial planner because of this topic, learning about student loans, public student loan forgiveness. He's a past guest on the podcast. And in June of 2024, he founded K-12 Planning, which is a financial planning company for educators. David, welcome to the podcast.

SPEAKER_02:

Oh, thanks so much. It's great to be back and great to see you.

SPEAKER_01:

Well, when it comes to student loans, um, a year and a half is like a decade's worth of new news. Um, so we talked and we'll make sure to link to our past episode. Um, but I think we need a fresh set of eyes and a fresh perspective when it comes to the student loan landscape, both for current people who owe on student loans as well as those of you who are considering student loans to help pay for your college or your kids' college. Um, so I'm so glad to have an expert here today to discuss.

SPEAKER_02:

Yeah, let's we can dive right into it. So one of the biggest things that that I know people are worried about is public service loan forgiveness. And the good news on this is that it's not going away. It's not um there's a lot of there's a lot of information out there, and some of it's good and some of it's bad, right? Um, but public service loan forgiveness is not being taken away. It's still a program that's working, people are still getting their loans forgiven. And under the public service loan forgiveness umbrella, all of the loans are forgiven federally tax-free, which is big. And in 49 states, tax-free, not Mississippi. Why? I don't know. But Mississippi taxes PSLF. Um, so that's that's kind of a big thing. The the other part of that that that will become interesting to see what happens in the future is who qualifies for public service law forgiveness. So there's kind of a push right now to um to undermine some of the current legislation that's out there and say, hey, you know, well, it's we say nonprofits qualify, but okay, who is a nonprofit, right? That that could be an interesting thing that's coming up in the future. Um, but you know, I work with a lot of educators. I think that most of them are safe as far as public service loan forgiveness. Um, anybody who works for the government, all of that seems to be safe right now. So that's a good spot to be for a lot of people and and can really save a lot of money um going down that path.

SPEAKER_01:

Yeah, so public student loan forgiveness. Tell me what the rules are today. So you need to be the rules haven't changed yet, right? You working for a nonprofit. So a lot of um educators obviously are an area of passion for you. So um working for a university, working for a public school district. Um, a lot of medical service providers are working for nonprofit health systems. Right. Um, if you work for just a plain old 501c3 nonprofit, um all of those count, right?

SPEAKER_02:

Correct, yeah. So the rules, the other rules are that you have to make 120 qualifying payments. A qualifying payment is determined as one that's under the uh income-driven umbrella. So the income-driven repayment plans, there's a bunch of them out there. We'll talk about that here in a minute with some changes. Um, you have to you have to uh be uh work employed by by a qualified employer. Um, and then during that time.

SPEAKER_01:

And you have to work full-time, right? Like I sometimes I've had people that were part-time employees, like at a church, let's say, or um a nonprofit. It's it's there's some work requirements that come in there as well.

SPEAKER_02:

The official language on that is that you have to work for 30 hours per week or full-time as determined by your employer. So basically the the at the end of the day, one of the things I tell people it's kind of interesting, is when you you have to get this thing called an employer certification form to sign to have signed off to send to the Department of Education to get your credits to count for public service loan forgiveness. At the end of the day, the only thing that matters is what your employer will sign off on. So if you don't know if you qualify or not, submit the form and find out. If you only work 25 hours and you're part-time, guess what? If they sign off on the form, then you're then then you're good. So so just if if you're questioning it, I always say, hey, what's the worst that could happen? They tell you no, okay, then you're in the exact same boat that you are today. But maybe they sign off and say you're good, then you get some credits that you didn't have before.

SPEAKER_01:

Very interesting. I think you know, even if you're negotiating with an employer that happens to be in a nonprofit, I'd be like, is that you know, can this be a consideration of my hire to sign off on this? Not to get circumvent the rules, but to, you know, just know up front.

SPEAKER_02:

Yeah, you you want to one of the big things I always tell people too is that it's it's kind of like whenever you play any game, the people that know the rules of the game are a lot more likely to win the game than the people that don't know the rules, right? And and student loan forgiveness and student loans in general uh kind of have a set of rules that go along with them that's similar to a game. And so uh the people that do know them and can navigate around them all legally, we don't want to do anything illegal, but you can you can kind of bend the way that uh that student loans operate as far as uh repayment plans, as far as how you file your taxes, when you file your taxes. There's a lot that goes into it that can that can determine your actual payment amount. And then from there, qualifying for public service loan forgiveness. For example, here's one that a lot of people don't know. You mentioned working at a university, but if you're an adjunct professor, uh your time in the classroom, a lot of the universities and and that I that I've had people sign up, get employer certifications for, will sign off that they only count the time that you are in the classroom. But one of the rules on PSLF is that you actually get a 3.35 multiplier for every hour that you're in the classroom that they should be signing off on. So if you're working 10 hours in the classroom, then you know, 10 times 3.35, you've got 33.5 hours that's per week. And so that qualifies as a full-time, you know, full-time uh employer, uh employee, and you should be getting credit for that for public service loan forgiveness. Little things like that that a lot of people don't know, right?

SPEAKER_01:

I didn't know that. So thank you, David. This is exactly why um I think in um student loans in particular, um general financial planners may have some knowledge. I I think we all have some knowledge, but um, this is a very complex area. So going to an expert is in my mind, time and money well spent.

SPEAKER_02:

I agree because the other the other part is that if you do a lot of these things incorrectly, it can cost you hundreds of thousands of dollars. One example of that right now, when we talk about changes, um there's a subset of people who took out loans for their kids already. We call these parent plus borrowers. And if you're a parent plus borrower right now, before July of 2026, July 1st, you have to do this thing called the consolidation if you want to have any access to an income-driven repayment plan ever again. So that's that's kind of crazy, right? Because you're gonna be cut off from access to any income-driven repayment plan ever after July 1st of 2026. If you don't consolidate your loans, I see parent plus borrowers with hundreds of thousands of dollars of loans all the time. And if they did not do that, they would be put into the standard repayment, and their their monthly payment could be something in the ballpark of 1500, 2,000. You know, it's it's it's not gonna be based on income, it's gonna be based on the the terms. But they might do like an extended repayment plan with where they'll drag it out over time, but no forgiveness options would be available anymore.

SPEAKER_01:

If you good, so if if sitting with your kid is a junior and you've been using parent plus loans, are you out of luck because they're not gonna be that your loans aren't gonna be done by the time the consolidation deadline hits?

SPEAKER_02:

Yeah. Yeah. So, you know, they have to be in a position where you can work with the loans. And so if a kid's still in school, usually what they're what will show on the file is an in-school deferment, basically. Like it'll say in school status. And so, yeah, that there's a really good chance that you wouldn't be able to get those loans to to basically break them out and consolidate them. Okay. Um and it's that's a tough part, right? That's for people that are kind of on that bubble or still taking out loans right now. If you take out a loan after July 1st of 2026, then whether it's for yourself or if you're doing it as a parent, that has big ramifications on the repayment plans that are available to you moving forward. Because there's a new repayment plan that's coming out in July of 2026 called the the repayment assistance program, I believe. RAP is the acronym is RAP. And uh, if you take out a personal loan for yourself after July of 2026, 2026, you will only be allowed to be in that wrap repayment plan. But if you don't, if you stop taking out loans before that, then you have options to get into like IBR. And right now there's pay and ICR are still available as well, but those are going to be closed off by 2028, and they're all gonna be consolidated down into IBR. Okay.

SPEAKER_01:

So and IBR means that it matters how much you're making, and if you make less, your payments may be less.

SPEAKER_02:

Correct. And rap is the same way, honestly. So the rap rap gets a bad rap, but that's okay, my joke. Um it's got a lot of negative press, but but it's actually still a pretty decent repayment plan. The IBR uh has an old version and a new version, and it's all based on if you took out loans before um 2014 or after 2014. And so if you are on the old version of the IBR plan, rap is a better deal. It's actually a better repayment plan for most everybody. If you were on the new version of IBR, then you don't want to be on wrap. Uh, the new version of IBR is better for most everybody. Um, so it just kind of really depends on when you took out the loans. And uh, so right now there's a lot of people that are in pay, pay as you earn, and they will get consolidated into that new IC or the into the ICR uh IBR plan. Well, pay was based on if you took out loans back in 2000, I think it was seven, 2007 or 2008. It's not sticking to my brain for some reason right now, but it's it was based on if you took out loans at that point in time. So there's a a period between pay uh of two like to between 2007, 2008, and 2014 where you could be in this better repayment plan. But when you get automatically put into IBR, it's gonna send you into the old IBR, which is gonna increase your monthly payments, basically, is what's gonna happen. And so at that point in time, it would be worth exploring, you know, what does wrapped look like for you? Okay, so that's one part of it. There's and it gets complicated. I'm sorry, I'm I I will try to make it.

SPEAKER_01:

No, we gotta go there. This is what the this is why we have you.

SPEAKER_02:

I will try to make it as not complicated as possible, but the problem is that it's so unbelievably complicated.

SPEAKER_01:

So uh Well, I'll just cut to the chase too. Um, I for clients that have student loans that have considerations for public student loan forgiveness or are in a place where we need some advice on kind of how to make the game plan to repay. David, and we will provide links in the show notes and mention it at the end, does this type of analysis for people? So there is a pathway. You know, we're not gonna solve all of your problems in this 30 minutes, but there is a pathway to getting more details personalized to you.

SPEAKER_02:

Yeah. Couldn't have said that better. It's it's worth working. You don't have to necessarily work with me. There's a lot of people that do this work, but I would definitely find somebody that can help with it because it gets so complicated so quickly, right?

SPEAKER_01:

It it certainly does. So I interrupted you. Where are we going next in terms of the level of complexity?

SPEAKER_02:

So the next part of it is when we talk about some changes that are coming up, if you're not going down the public service loan forgiveness path, there's what there's another thing out there to still get forgiveness called the IDR forgiveness. It's the long-term forgiveness. And IDR forgiveness was uh kind of originally set up to be in for people that were on the income-based repayment plan. And because of COVID, there was some I can't remember the act that this fell under, but right now there is it's it's all federally tax-free, all of the long-term forgiveness through the end of December 20 2025. Starting in 2026, this will be taxable again, right? Taxable.

SPEAKER_01:

And we're talking about people that have had loans for is it 20 or 25 years?

SPEAKER_02:

Yeah. 20 depending. If you're on if you're on certain repayment plans, it's 20 years. If you're on other repayment plans, it's 25 years. Well, guess what? So pay and in new IBR are 20 years. The old IBR is 25 years. Well, guess what? It gets more complicated. This is where I was mentioning that part. If you switch to wrap, it goes to a 30-year forgiveness uh term for the long-term forgiveness. 30 years.

SPEAKER_01:

Does it start a new term, or it just says everything in the past plus whatever equals 30?

SPEAKER_02:

That's something I don't know 100%. I'm gonna guess that the old credits will count. They have not specifically said that yeah, I would I would imagine sometimes you better wait to find out because the the the rap repayment plan is not even out yet. It doesn't come out until July of 2026. So there's some things that we're gonna have to find out. I have to imagine you can go on to uh student aid, there's a secret link, and I can give you the the the link to go in and find your counts for your um long-term forgiveness. Uh basically it'll show you all of those numbers, but but they're hidden. It's a it's a hidden link.

SPEAKER_01:

Okay, so we'll we'll get the secret link. Yeah, how exciting.

SPEAKER_02:

Somebody had it on Reddit, which is kind of crazy. And I found it there and and used it once with a client. I was like, oh wow, this is actually it works.

SPEAKER_00:

It's working.

SPEAKER_02:

So um at the top of this thing, by the way, you have to click, you have to check a box that says pretty print, P-R-E-T-T-Y print. And there's a little box next to it, and you check it and it it turns it into readable, uh readable data. Um, but it will show you kind of how many payments you've made towards the you know uh 300 that you might owe on an old IBR, for example. And so it'll say something like you you've made 244 payments out of the 300 necessary, you have this many more remain. So it's it's good information to have. But so I think that they're going to continue to count those old payments. And when you switch to wrap, though, instead of being where you could have it forgiven at 20 years or 25 years, it'll extend it out to 30 years. So that's 360 payments. What's that?

SPEAKER_01:

So we're looking at how many payments? What is 360?

SPEAKER_02:

360.

SPEAKER_01:

Ooh, a lot.

SPEAKER_02:

So the reason why that's a big thing to consider is that if you're going for the long-term forgiveness and you're on old IBR, you could have a lower repayment by switching to wrap, right? You could have a lower repayment. But if you're going for that long-term forgiveness, it extends your timeline out for five additional years. So do you save more money by paying more per month now and having it forgiven at 25 years or extending it, paying less and having it forgiven after 30 years? That's a big planning decision and can cost a lot of money.

SPEAKER_01:

And are you saying that there's a tax bill at the end of the pot of gold at the end of the rainbow in this case? If you're on these types of forgiveness, is that you actually pay the taxes for what's forgiven?

SPEAKER_02:

Exactly.

SPEAKER_01:

As it's reported as ordinary income in that year.

SPEAKER_02:

Federal and state taxes reported as ordinary income on top of your other income. So somebody who's a wrinkle. Somebody who's making good money and has this hit, you know, could be shoved into very high tax brackets.

SPEAKER_01:

Especially if you're an And by the way, we're not talking about private loans. These are loans. So if you go to a bank and get a loan that's not through the federal government or you know, is extra on top, those don't have that forgiveness function, correct? This is just for um a cohort of loans that are subsidized or sponsored by the federal government.

SPEAKER_02:

Exactly right. Yep. So the the next spot that I'll go to, and I'm not gonna give specifics on this uh as far as numbers, but I think it's super important for people to look into this. Um but it's going to be the borrowing limits. So that's gonna go into effect in 2026 as well. And that's a big change that's coming uh kind of down the line here. I'll I'll talk about a couple of them. But because there's been a lot of news about one of the things I actually wrote a um a weekly newsletter about this two weeks ago, but it's the the status that was based on professional status versus non-professional status.

SPEAKER_01:

I don't know if you've seen for grad school, right? We're talking grad school, grad school and beyond.

SPEAKER_02:

So, you know, teachers and nurses were considered non-professional status, which doesn't mean you're not a professional, you're still professional, but but you can't take out as much in student uh in student loans as somebody who's in uh you know a doctor or or somebody who's going into medicine and there's a a a chart of all of them. I don't have that right in front of me of who qualifies, but essentially there's gonna be some borrowing limits, and this is extremely important to note because um if you go beyond the limits, then the the options are basically gonna be that you can you're gonna have to either fund this yourself or take out private loans. Private loans are an absolute beast, right? And so you can actually uh you the the other the person on the other side probably shouldn't do this, but you can have a cosigner on your private loans. And uh most people need to have a cosigner in order to bring the interest rate down because I've seen interest rates in the 15 to 20 percent range on private.

SPEAKER_01:

What a gut punch, that's awful.

SPEAKER_02:

It's insane. And that's I mean, when you're uh let's say 18 to 25 years old, if you're if you're in the younger version of going to school, you don't well probably anybody, honestly, but but I'm gonna pick on these people especially. It's if you haven't had a a real job or a full-time job, if you don't have daycare, childcare, mortgage, all of the things that that life kind of tacks on to you at different stages, you might not realize what a monthly student loan payment that's you know$2,000 will actually cost you when you get to that time.

SPEAKER_01:

Yeah, call it a rent check. Yeah. Or a mortgage. Um A low mortgage payment, probably fleeting nowadays, but that is a ton of money.

SPEAKER_02:

Exactly. And I think that I was in the same boat. So I'm that's why I'm saying I'm I'm not necessarily picking on on these people, but you you don't understand what life looks like outside of you know college at that point. And so I remember thinking, oh yeah, I can pay, you know, 500 bucks a month, no big deal. Well, guess what? When when you actually get to you know our stages of life and beyond, it 500 bucks is hard to come up with sometimes, or it can be, and so, or a thousand or or fifteen hundred, and that's on top of the federal student loan bill that you already owe to. So most of the time, people are taking out the federal side and then go into private. So, anyways, there's gonna be some big um so there's going to have to be some big changes in the student loan.

SPEAKER_01:

A readjustment, a readjustment, the landscape is big time changing. There's not as much free money, um, not free money. There's not as big of a bucket. And I mean, part of me is like good because, you know, if you go to a parent that hasn't been able to save for college, which like not been able, maybe it's not a priority, and then you say, Oh, well, this 40,000 that we would have expected you to write a check for, you can just borrow it instead. But parents are having kids older and older in terms of when they have their first child. And so this is bumping up against your retirement. And guess what? You do not get, you know, um, in most cases, forgiveness for these loans. And you cannot borrow money for to pay for retirement. Yeah, it's just not an option. So part of me is like, good. We I I don't want parents to have six-figure debt to put three or four kids through school. But the other part of me is like, well, then how the heck is it gonna work? Um, and I think you need a lot of flexibility and some careful considerations when it comes to how you plan to pay for school.

SPEAKER_02:

I'm in the same boat. I think that a lot of times we as humans are very resourceful, right? And so if you've got your back against the wall and you say, hey, I can only take out up to, let's say,$100,000 maximum aggregate. It's kind of the the the non-professional graduate borrower that's the maximum they can take out,$100,000. Well, guess what? Can you get a teaching degree with your master's and a specialist all in for under$100,000? I hope so. Maybe so you may have to get creative on where you go to school, where you're going to pick up additional credits, paying some out of pocket and some with loans. But but I think it will I think it will overall help people to have some borrowing limits because I've seen some extremely wild um cases over the last couple of years where where people have borrowed a lot of money and then get stuck with trying to figure out how we're gonna pay this back.

SPEAKER_01:

And it it's yeah, the it's in current system, it has been much easier to get in over your head in for some types of borrowers, like grad students who are not going to transition to a super high paying job. So like the return on investment might be a little bit murkier, and especially parents borrowing to pay for school is is just like that's where they route you to. They're like, Yeah, it's gonna be great. You're gonna borrow, you know, 10, 20, 30, 50k. And then you're left with um a huge bill when you think that, you know, there may be multiple kids being considered multiple years, not everybody graduating in four years. Um, and you know, when you aggregate those wild examples, it's 1.7 trillion of loans second only to mortgages when it comes to our personal balance sheets. So um, you know, this is this is not just walking around money. This is like a big burden on US households.

SPEAKER_02:

100%. 100%. So that's a big change coming up in 2026 is the borrowing limits.

SPEAKER_01:

And I think it feels pretty abrupt though. So that's the curiosity is like, well, how is this gonna work? Um, or if you know, I think there's some um kind of limits being imposed on parent plus loans as well, right?

SPEAKER_02:

$20,000 per child per year with a maximum of$65,000 per dependent borrower, basically. So so the thing is that you can still get it in over your head really quickly with a couple of children, but it it at least has some boundaries there.

SPEAKER_01:

Yeah, I think I will mention just um because we're focusing on borrowing, um, statistics say that there are um it is a competitive environment when it for a lot of um uh ideal students, if you're flexible on where you'll look for schools, you may be able to find better deals around where there's more grants or less cost um or you know, less needing to borrow. So um all is not lost. It is becoming more difficult to borrow. But for the families that aren't like this is the only school, um, you know, uh private school with not a lot of grants or bust for one particular program, then um, you know, you've got to look at that other side of the equation, which is what is the net cost of one school versus another for the programs that you're interested in pursuing as part of the factor if you don't have, you know, just a giant bucket of 529 money kind of ready to spend.

SPEAKER_02:

Yeah. The the thing that I hope doesn't happen, and and I I think it will probably there's gonna be some long-term effects of this. This is kind of off topic, but but I think it's gonna impact who has access to certain degrees, number one. And I think it's going to impact how many people pursue those degrees. And so then it's like at that point, it's gonna come down to are as many colleges going to continue to offer certain degrees. It may have a there's gonna be a triple effect of of of this somewhere down the line. But overall, it's it's just an important thing to to know that's out there and kind of have on your radar. And to your point, a lot of this stems around you know, planning for retirement, planning for day-to-day, you know, expenses. So there's a lot of things to consider. Um so many.

SPEAKER_01:

And that's why having somebody that can see really deep into these crevices of complexity, as well as someone who can look at your overall life and say, uh, you know, like I don't know if about you know, adding the size of a mortgage on top of your mortgage and everything else, or no, we can do this and it may take some, you know, like some strain now, um, but long term this isn't gonna harm you, or like, you know, um, if not, let's look at plan B or let's at least consider the consequences.

SPEAKER_02:

Yeah. Okay, I'm gonna take it one more um one more avenue here as we wrap up with some of the different uh well, this one's actually not a change. There, this is but it's it'll I think it'll help people. I'm gonna pull up a for anybody that's listening on the podcast. If you if you go to YouTube and watch this on the YouTube, you'll be able to see the actual image. But one of the things that's important to note is that the ability to file your taxes separately, if you're married, married filing separately, is still available for student loans and can save people um a tremendous amount of money in certain uh aspects. Now, one thing to note on this before we kind of dive into the full example here is that when you file separately to to intentionally lower a student loan payment, it does not mean that, especially on like the old IBR, a new IBR and pay, the interest is still accumulating, right? So if you intentionally lower your payment, you're only paying a small portion of the interest. The rest of the interest, if you've got a large student loan balance, the rest of that interest is still accumulating and growing. And so if you're not going for public service loan forgiveness, if you're not going for uh even for the taxable forgiveness, you have to kind of take into consideration this thing could balloon into such a giant um you know, student loan bubble, yeah, that it might not be worth it unless you're going for that public service loan forgiveness. And so that's another big consideration is to make sure that what you're trying to achieve actually aligns with uh there's been a lot of times where I'll I'll work with people and it's hey, let's pay down some of the student loan debt and go for the long-term IDR forgiveness so that way you don't have as big of a tax bill at the end. So it's kind of this balancing act. But in this particular example, I'm gonna pick on a teacher. Uh, so this teacher um who's married, and they've got a total income of 145,000 uh of$145,517. But the teacher on their own income, uh, this is a pretty standard salary here in I live in Missouri, so$65,330. This is a real life example, by the way. And I'm gonna show you what this does on the tax side here in just a second. But this person is gonna be on the uh new IBR, the pay, uh, those two have the very similar uh payment structure that goes along with them. And so everything on I'll run through this a little bit, but it's it's it gets more complicated, which unfortunately is just kind of the nature of student loans. But we start with a family size, and on the married filing jointly, we can count the the two parents, they've got three children in this example. On married filing separately, you have to uh uninclude the other spouse. So they've only got a family size of four in that one. Then they use this thing called the federal poverty guideline to actually determine what your payment's gonna be. And you can go search federal poverty guideline 2025, look up your family size, and you can see what you can uh subtract from your adjusted gross income uh to get down to what they call the discretionary income. And there's actually a 1.5 multiplier. Like I said, I'm sorry that it gets complicated, but at the end of the day, here you don't make the rules, you just explain them. That's right. At the end of the day, the part that people need to know is that this$145,000 income, when they were filing jointly, they were gonna have a payment of$742 a month by filing separately and only showing the teacher's income of$65,330. They can lower their student loan payment down to$143 a month.

SPEAKER_01:

And this is a payment on how much, like how much had the spouse borrowed.

SPEAKER_02:

It doesn't matter. That's the that's the craziest part, isn't it? Because it doesn't matter what you're borrowing.

SPEAKER_01:

This could be on$40,000 or$10,000 or$100,000.

SPEAKER_02:

Or uh a million. It doesn't matter because it's all based on these income-driven repayment plans, it's all based on family and income only. It doesn't have any effect on how much you actually borrowed. Okay, it's kind of weird, right? So on this example right here, they are saving seven thousand two hundred-ish dollars per year by filing separately. So then the question becomes well, how much would they pay additionally by filing separately, right? Because there's usually a penalty for filing separately.

SPEAKER_01:

On their taxes, whatever it's not the yeah.

SPEAKER_02:

So I I use this program called Holistic Plan. Do you use Holistic Plan? Me too. Yeah, Holistic Plan. And so I threw this in here um and and ran the exact scenario. Uh, these are my names up here, so that it's not a client name. Uh, so I ran this under my own uh profile, but this is an actual client scenario that they gave me permission to use. And if we roll all the way down here to the end, we can see this is the uh this column over here is the filing jointly, and they would have gotten back a refund of 1,270. And these are the two filing separately columns. Well, one person pays$3,246 additional dollars, but the other person gets back a refund of$4,116. This is the teacher that we put all the kids on. It ends up being a difference of$400 for the year, which is which is insane. So they're gonna save$7,200 from the student loan side, and they're going to pay just an additional$400 in taxes. Now, the bigger that the income disparity is between spouses, the bigger of a tax liability you'll have, right?

SPEAKER_01:

So on the spouse that's filing is married, filing separate, that doesn't have the has a higher income in most cases.

SPEAKER_02:

Exactly. So one person's gonna end up paying a lot more, the the other person helps bring them down to into a lower tax bracket. The whole reason why I bring that up is just because there are options, right? You don't have to a lot of people will say, Oh, we make this amount, we owe this amount. That's not always the way it works. There are uh I'll say loopholes, but they're all legal.

SPEAKER_01:

It's all with the planning strategies is what we call that in our world.

SPEAKER_02:

That's that's way better. Uh so there are strategies that we can use. There's also when you file your taxes, because they do this thing called an income recertification each year, and it happens at the same time. So whenever you whenever you took out your loans originally, you you certified your income. Then every year after that, you're supposed to have to certify your income. We didn't have it for a long period of time during COVID, but they've they've started back up now. And guess what? If you file for an extension and don't file in April and do file your taxes in October, well, that opens up a six-month window where if you do your income recertification in there, you were using the previous tax years uh information and not the most current tax years information. So if you had a giant uh income spike in one year and you wanted to like just basically jump that, well, you could do that by by filing your taxes at certain times. So again, some pretty intense strategies there that are that are that are really interesting, in my opinion.

SPEAKER_01:

I agree. They are interesting. They're also intimidating if you're not doing this every day. So having a student loan native explain it to us, I think is so valuable. And I love that you use that example. Um, so if you go to find Pearl Planning and YouTube, if you're a regular audio listener, you can look at those examples um in this episode around um near the 30-minute mark. Um, so what I know is that things are constantly changing. And if you're sitting in a situation um where you have these considerations and options, it may be time for a review. Are you advising, David, for any clients that aren't um, any people that are not subject to um PSLF and um it may be murky whether they're gonna hit the 20 or 25 or 30-year repayment target? Are there ever cases for people that are making good money that have um that would qualify are a good borrower, have a good credit rating for them to um uh refinance their loans that at higher interest rates into um private loans um for refi?

SPEAKER_02:

100%. So if the plan is to pay back the loans and not go for any forgiveness, then I think that getting it into the lowest possible interest rate is always going to be your best option. It's kind of like a house. You know, if you can refinance from a higher interest rate to a lower interest rate, you're going to eventually either sell the house or or pay off the loan. Kind of the same thing with the student loans.

SPEAKER_01:

If you can, if if the if the if you know that forgiveness is off the table, then Which we don't know what future political regimes may bring to the table. Even a few years ago, it seemed more potentially realistic for a broader subset of people, but um you know, that's something that might be a personal, you know, kind of um prediction. Um, it's very difficult to see the future when it comes to that.

SPEAKER_02:

100%. And what I would say is that you've got to use the information that you have today to make a good decision. And it may come back that it's not a good decision in the future. We don't know that part, right? But if you're right now, there's some parent plus loans out there that were part of the 2023, 2024 cycle, I believe, or maybe 2024, 2025, but they were seeing it above 9% interest rate. Well, you could probably, if you're in uh a parent, you know, there's a pretty good chance that you might have a good credit, good enough credit to get those over to a private private bank and get those things lowered down to five, six, seven percent. I would look into doing that for sure, especially at nine percent. But uh, but but again, to your point, you don't know what's gonna happen. They could come down the road 10 years from now and say, you know what, we're gonna get rid of every single student loan balance out there. I don't think that's gonna happen, but you never know. And uh and if you did make that move, well, then you'd be like, hey, that was a really dumb thing I did. But but you can't make you can't do what-ifs on that, right? It's it'd be it'd be really it we could do that all day long with everything.

SPEAKER_01:

Right. There's so many, there's so many different possibilities in a certain period of time. I guess for a cohort of people, because you know, I have some um clients that just say, hey, this batch of student loans, I'm just gonna pay the minimums because I'm hoping there may be a change in um, you know, kind of perspective on forgiveness. Um, but you over time, um, making sound, solid financial decisions on refinances, things like that. It's not that you have to do everything perfectly. It's just, you know, staying rational and staying on top of um finding, you know, paying 9% for 10 years might be more penalizing than um getting some forgiveness in the future. So there's so much to talk about on this that I know we're gonna be having you back um someday soon, David. But in the meantime, how can people find you if they need a personalized analysis for their student loan situation?

SPEAKER_02:

Yeah, they can go to my website. So it's www.k-12planning.com. And there's a spot at the top that says student loans, and they can go in there and schedule a student loan consultation. That's the the best route to go.

SPEAKER_01:

Yep, it's really easy to schedule just right off the website. So, David, thank you so much for joining us. Um, may the times remain interesting as they always do, but I'm so glad to have, you know, kind of a guide through this student loan harass. Um, we appreciate you.

SPEAKER_02:

Thank you so much. Glad to be here.

SPEAKER_00:

Thank you for listening to the Women's Money Wisdom podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to ProPlan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as the receipt of or substitute for personal investment advice from ProPlanning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and from CRS discussing our advisory services and fees are available upon request or on our website platform at PerlPlan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.

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Melissa Joy, CFP

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