Denis O’Brien [0:37]
Welcome to Episode 173. Everything about student loans. Hey, Money Clan, a very warm welcome to the Chain of Wealth podcast. I’m your host, Denis O’Brien.
Katie Welsh [0:49]
And I’m Katie Welsh.
Denis O’Brien [0:50]
Okay, so today we’re doing a deep dive into student loans. And we’re going to be chatting about all the different kinds of student loans. And like when you should look at refinancing, all that kind of wonderful stuff.
Katie Welsh [1:1]
Yes, student loans are near and not so dear to my heart.
Denis O’Brien [1:8]
Well, I mean, you look, you just finished paying off your student loan. And you know, there are a lot of options available to people and a huge amount of different plans. And very often, if you get stuff under control, you’ll be way better off than if you just don’t do anything. And there’s a couple professions that really can benefit from it.
Katie Welsh [1:26]
Yeah, for sure. And it’s awesome stuff today that I wish that me 10 years ago would have known about.
Denis O’Brien [1:33]
Yeah, one hundred percent. Anyway. So before we dive right in, if you guys haven’t already, we would love if you joined our debt destruction course. So the debt destruction course Katie and I are putting together is a course all about debt. And regardless of what’s happened to you, this will be super, super beneficial to you. We’re actually giving away five slots to people that tell us their debt story. And yeah, we would love if you guys would apply. Head on over to chainofwealth.com/debtcourse. Okay, you ready to dive right in?
Katie Welsh [2:5]
Denis O’Brien [2:5]
Fantastic. Let’s do it.
Okay, so student loans. And, you know, there’s a ton of different terms when it comes to loans. There’s subsidized, unsubsidized, there’s private and public, there’s SLDF, there’s income driven repayment plan. So what is going on?
Katie Welsh [2:37]
Yeah, I know. And, and every time I ever heard the phrase student loan, or go to the financial aid building, in college, it was just, I would instantly get tired. It’s so overwhelming.
Denis O’Brien [2:51]
Yeah, one hundred percent. So today, like, I’d like to just chat a little bit about just general student loans, and you know, everything that people should really understand when it comes to loans.
And that’s how people that can take advantage of it.
So first off, let’s chat about subsidized versus unsubsidized loans. What is your knowledge about it?
Katie Welsh [3:12]
I don’t have any you looking at me very blank, I don’t have.
Denis O’Brien [3:16]
All right. So here’s the thing when you’re in college, it depends on whether you’re doing an undergraduate or a postgraduate degree. So if you’re doing an undergraduate degree, and you take out a normal student loan, Department of Education, or whoever it is, typically your loans will be subsidized. What that means is that the government will pay the interest on your loan while you are in school, and until you’ve graduated. So what that means is, when you’re doing your undergrad, you’re essentially got money for free, and you will then start paying this money back once you graduate and hopefully start earning more money. Now, if you go to graduate school, graduate school loans are not subsidized. They are unsubsidized loans, which means while you are in college studying for your post graduate diploma, you are paying interest on those loans. Now, whether you’re actually physically paying it, you’re probably not you’re probably, you know, like, just racking up all this debt, but you were being charged interest and you will be liable for that interest on those loans. Oh, yeah. So typically, if you’re doing like a masters or something, you’re going to be paying interest on that.
Katie Welsh [4:26]
I will be completely honest with you, because I know I had a lot of both subsidized and unsubsidized loans. I never actually understood what either one of them mean
Denis O’Brien [5:6]
yeah, so that that is the clear distinction between the two. So yeah, like definitely something post graduates or postgraduate study is great, and it can increase your income, but just bear in mind that you are going to be paying interest on those loans from day one while you’re still in college. So that’s essentially the distinction between those two. Now, let’s chat a little bit about the difference between public versus private loans. So okay, do you know anything about the
Katie Welsh [5:6]
only a little bit? Okay, so I know that private loans are through a bank of your choice, and they run your credit score and your credit score, I would imagine probably dictate your interest rate.
Denis O’Brien [5:22]
Yeah, right on point. So yeah, like a private loan is typically with a bank or other financial institution, and they will pull credits give it to you. And as you know, you need to meet all sorts of eligibility. And if you can’t afford us, you may want to get a cosigner, a whole bunch of stuff.
Katie Welsh [5:37]
So kinda like buying a car.
Denis O’Brien [5:39]
Yeah, it’s actually like buying a car, because you’re dealing with a private company in this instance. Now, the thing is, when you are getting that kind of loan, there is a lot more restriction on you in terms of your ability to like qualify for programs such as public service, loan forgiveness, or PS
Katie Welsh [5:56]
Denis O’Brien [5:57]
Yeah, so public service loan forgiveness. Now, this is actually a really great thing. But the problem is, is that it’s so misunderstood. I don’t know if you’ve read any recent articles about PS Oof. But the article that I recently read was basically saying that in the first year that people were eligible for it, less than 1% of those who should have been eligible for it actually ended up getting us.
Katie Welsh [6:20]
So hold on, can you back up for a minute? Yep. Well, like, because I talked to a lot of people who are doing the Public Service Loan Forgiveness as teachers. And they are basically gung ho for it, because what it says is that you pay a certain amount for a 10 year period, and then the rest of your loan is forgiven. rots, correct. Yeah. But it is, in my opinion, very finicky and very gambling. Like, if gambling
Denis O’Brien [6:53]
is the word to know, like, I disagree with that. So I don’t think it’s gambling. But here’s the thing, and most people get this wrong, which is why, you know, it’s not gambling at all, less than 1% of people actually get us. The reason that it’s like, only less than 1% of people get it is because they don’t understand how to do it. And it’s like anything, when you do something, you need to understand exactly what goes on. So that’s to actually qualify for such possible some kind of a program. So you mentioned making payments for 10 years, that is correct, you have to make payments. But one of the payments on the payments are on a qualifying loan that is income driven, or some sort of income based repayment program. So what that means is that you have to enroll in some kind of an Income Based Repayment Program on your loans, and only certain type of loans are going to qualify. So one trick that a lot of people do is if they have loans that don’t necessarily qualify, you can consolidate loans to qualify. So as an example, some loans that don’t qualify if you’ve got a whole bunch of loans, which as an example you did, in order to qualify for public service loan forgiveness, you would need to consolidate a whole bunch of them, and then start making payments on one consolidated loans that have a whole bunch of different loans. But then
Katie Welsh [8:16]
I feel like they’re such fine print when it comes to the loan forgiveness program, that it’s easy to overlook something, ya know. And if you overlook one thing, then you’re wiped out. And that’s why I feel like it’s family. If you follow it to a tee and you know exactly what you’re doing. And you’re good with this sort of thing. I think it’s a great idea. Yeah, but for me, I think it was it was a gamble a thing for me, because I felt very confused through the whole thing.
Denis O’Brien [8:50]
Yeah. So here’s an example of where you may get confused, where you may get tripped up. So say you take your loans and you consolidate them, and you’ve got this qualifying loan, you’re working at a qualified employer. So in terms of qualified employers, any federal, state, local governments, non for profit, 501, C, three, any nonprofit and public services to begin, like stuff like the old military, public safety school libraries, all those sort of general public services will qualify for public service loan forgiveness. Now, here’s the awesome thing about this case, anyone working for that organization can qualify. So whether it is someone right at the bottom, that is maybe you know, as an example, working in the military, and they are cleaning toilets, or something like that, they will qualify just as much as the top ranking General, you know, all those people qualify. And the whole idea is that anyone serving the organization is eligible. So whether it is people that are like straight out of school, whether it’s top level management, everyone qualifies that will support that company, organization. Okay, so that’s the first kind of thing. So you have to have a qualifying employment. Now what you need to do is you need to have your qualified loan, and you’re qualified loan needs to be, um, you need to make basically all those payments. So it payments for 10 years, it’s 120 payments. Now, here’s the catch that a lot of people don’t get, the payments that you have to make have to be based on the Income Based Repayment Program. So as an example, so you got a loan, and they say to you, you have to pay $100 a month on the loan, you try and get ahead by making payments of $150. That’s not a qualifying payments, because you didn’t stick to the plan.
Katie Welsh [10:38]
Okay, that makes sense. So you,
Denis O’Brien [10:39]
you basically just gave $50 away, and you added another month on to your payment program by not making the correct payments. So, long story short, to actually qualify for this, you need to follow the instructions to the tee. Now, the nice thing about these hundred and 20 qualifying payments, is they don’t have to be consecutive. So say for example, you may be missed a month and it was not on time. That’s okay. But make sure that you get back on track as soon as you can. And it’s still going to count. Okay. Yeah. So that’s essentially how public service loan forgiveness books and the parliament. And why get such negative feedback is people think that they qualify for us, but they don’t because they don’t follow the rules.
Katie Welsh [11:23]
People like, I hate to say it. Me. Well, yeah.
Denis O’Brien [11:26]
And the problem is that you had no idea that well, like, do you think, Oh, that sounds like a great plan? I want to be honest, I don’t understand what’s actually required and right. It’s a type of program that if you don’t follow the rules, exactly, you’re not going to qualify. Yeah. And like, like, say, for example, you know, change your payment program, like during the load, that’s going to mess you up as well. Alright, so you fun Phaedra know, whoever and you’re like, hey, let’s see what else you can work out. That could potentially impact your public service loan eligibility,
Katie Welsh [11:57]
and not a spoiler on anything. But the people at the place where you’re paying your student loan to, are not the most helpful people.
Denis O’Brien [12:7]
Well, Kate, like, I think they try to be helpful. But the problem is, is that what people say to them isn’t necessarily the full truth. I was actually listening to a podcast the other day about this very topic. And the professional question was doctors, and they were basically saying how doctors end up graduating. Now bear in mind, what I said about subsidizes non subsidized doctor will have unsubsidized. And then when they stopped during their residency and like all the long haul that they’re getting qualified for, they’re racking up interest on those loans, right? If they were to enroll in public service, loan forgiveness early on, and throughout their residency, make be involved in the Income Based Repayment Program, they could potentially knock like six years of their payments. And even though they’re making payments during residency, by the time they end up qualifying, they got four years left, and then they’re done. That’s such a win, and that they’re literally forgive whatever amount of money you have left on the line.
Katie Welsh [13:7]
Well, that is quite a sneaky way around it. Yeah.
Denis O’Brien [13:12]
But the problem is people don’t understand this, and they don’t do their homework.
Katie Welsh [13:15]
Right? Well, it’s confusing homework, then when you don’t really understand any of it.
Denis O’Brien [13:21]
Yeah, you’re 100%. Right, it is confusing. And, you know, I think that one of the best things you can do is really do your homework, if you are thinking about public service, loan forgiveness, or you’re busy doing that, make sure that what you’re doing is qualified. And, you know, like, it’s not a safe option, unless you follow the rules. And you don’t want to, like wake up in 10 years time and think, well, I should qualify, and notice that I had a loan that wasn’t eligible, you know, yeah, like that will really be a sting. So going back to public loans as well, versus private loans, private loans, on the other hand, typically, you can’t consolidate them into, like the way you consolidate your federal loans. Okay, so obviously, then those loans actually need to get paid back, you can’t qualify for psle. If for those,
Katie Welsh [14:10]
the irony that I’m the one that had all their student loan debt, but you’re the one that actually understands all of it, is actually quite incredible. Because I’m sitting here thinking like, wow, I wish I would have known all of this before.
Denis O’Brien [14:24]
Yeah. And like your own student loan as well. Like, we could have taken the stance, we’re going to try public service, loan forgiveness. But the problem is because you had like change up things too many times, it didn’t make sense. And essentially, your 10 year period would have started, like, when we started discussing your student loan. So instead of sort of doing that, we decided to knock it out, because it wasn’t a massive amount of money compared to like other loans. was only like $38,000. Right? It could have been a lot worse, it could have been like $150,000 as a teacher, which is not unrealistic. If you went to an out of state school and did your masters. You know, if it was more toward that region, we’d probably have to look into options like this. But having done what we did, we focused on it, we knocked it out quickly, which was more beneficial for us.
Katie Welsh [15:14]
Yes. Well, the fact that I changed it up so often, as you say, is just proof that I was completely clueless and what I was doing, and I just felt at the time that if I talked to fed loan, and at the like in that conversation, the Federal front, someone’s like, okay, you’re good to go. I was like, Okay, well, I have dealt with this for now. And that will be probably another problem for future Katie to figure out
Denis O’Brien [15:38]
rod, but yeah, like if if someone has sat down with you and explain to you the process of how this all worked, like you, you would have been in public student loan forgiveness from a way earlier stage. Yeah. And you could essentially have been done in like, three or four years from now. Yeah. Unfortunately, that’s not the route that you went. And I think most people don’t go that route. And this is why basically, no one actually ends up getting eligible to qualify for public student loan forgiveness.
Katie Welsh [16:6]
Because if you miss even just like one little thing, then you’re disqualified.
Denis O’Brien [16:10]
Yeah. And I think what a lot of people should really be doing is they should be doing their homework, they should be making sure they’re qualified. And if you’re not sure, and if you don’t understand it, you should reach out for help. There are tons of companies out there that offer advice on this kind of thing. And even your student loan provider, say maybe you have loads of headline, if you would have thought them up, and ask them how this works. And awesome. If you’re eligible, they would be able to help you. For sure. Cool. So just before we go, if you guys haven’t already, we’d love if you joined our debt destruction course, we are looking to give away the debt destruction course to five lucky people who want to hear your debt story. So head on over to chain evolve.com slash dead cause with love if you joined and like we’d love to hear how much you haven’t you’re dead, like what your pain is, where’s your happiness is like, tell us how you’re planning to pay back your debts. And like we said earlier, like this course will be available for purchase later on. We’re not going to make it super expensive. We want it to be affordable. And we want to help you guys.
Katie Welsh [17:11]
Yeah, and it doesn’t have to just be student loan debt. Just because like I suffered, it could be credit card debt, medical debt, any kind of debt. You just want to get out of it.
Denis O’Brien [17:21]
Yeah, hundred percent Kate and you know, we’ve had people apply for this already. And you know, they are 60 years old and they’re still in I make don’t have money for retirement, you know, and people exist like that. And look, if you someone listening to this and you are in that position, the worst thing you can do is adopt the ostrich technique, which, as Kate likes to call it, do not put your head in the dirt and pretend that everything is going to be okay. Look for help. There are resources out there. There are programs out there for you to sort of figure stuff out and help you get out of debt. So definitely jump on it just once again, it’s chainofwealth.com/debtcourse. Yes, we’ll catch you guys next time on another episode of chain of wealth.