Episode 30 – Here’s Why You Need A Plan for Your Student Loan Repayment featuring Meagan Landress, CSLP

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Click here for the full transcript, but please excuse any errors. It was transcribed automatically using Otter.ai

Stacey Cordivano 0:07
Hey there, it’s Dr. Stacey Cordivano. I want veterinarians to learn to be happier, healthier, wealthier and more grateful for the life that we’ve created. On this podcast I will speak with outside of the box thinkers to hear new ideas on ways to improve our day to day life. Welcome to the whole veterinarian.

Today’s episode is an important one for anyone that has debt school loans or is in the process of borrowing. On this episode, I get to chat with Meagan Landress. Megan is a student loan consultant for Student Loan Planner, and was the first person in Georgia to acquire her CSLP designation which is also known as a certified student loan professional. Her specialized education around student loan debt allows her to guide borrowers through informed repayment decisions, taking into account their full financial situation and financial goals. I hope you learn as much as I did from today’s interview. And now here’s a quick word from one of our amazing sponsors.

Questions about finances vincere wealth management is the solution. Isaiah Douglass is a partner of vincere wealth management and the host of the veterinarian success podcast. He is a fee only Certified Financial Planner. And he and the vincere team are dedicated to serving veterinarians in all stages of their careers, then seer can assist you whether you’re a new graduate getting started or an experienced that trying to navigate selling your clinic and moving into retirement, you have enough stress in your life, finances no longer need to be on that list. You can find a link to download their free resource called a financial guide for veterinarians on my website at the whole veterinarian comm slash resources. Thanks again to Isaiah and vincere wealth management for their support. And now enjoy the show.

Hi, Meagan, thanks so much for joining me today.

Meagan Landress 2:11
Thank you for having me. I’m excited to nerd out on student loans today with you.

Stacey Cordivano 2:16
Yeah, definitely. I personally think that student loan debt is a huge part of the mental well being crisis that veterinarians, a lot of veterinarians, face. So I think this is really important topic. I’m curious, I know that an average person coming to student loan planner group for help has about $270,000 in debt, is that correct?

Meagan Landress 2:38
Yep, that’s about right for a vet.

Stacey Cordivano 2:41
For a vet. Yep. So I’m curious, what emotions are people coming to you with? Or is it just like complete overwhelm? Or like, what are you getting from veterinarians that you hear from?

Meagan Landress 2:52
We do get a lot of overwhelm. We get anxiety around, you know, how to tackle this mountain of debt when they went into this profession for a passion not necessarily to make, you know, a ton of money and but they graduate with, you know, huge loan balances that seem, you know, it’s a mortgage, that you you cannot live within the brain mortgage, so that there’s a lot of anxiety around it. Sometimes there’s a lot of not necessarily regret, but maybe shame. Like they feel like they either did something wrong, or maybe they went into the wrong profession, or maybe their uncle is telling them that they were irresponsible for borrowing this much. But the reality is that school is very expensive, you know. So those are typically the emotions we have coming to the table initially when we start working with someone.

Stacey Cordivano 3:39
Gotcha. And generally speaking, are people coming to you with any idea of a plan or are most people just like, I didn’t have a plan, graduating from vet school, and now I need help.

Meagan Landress 3:50
It is really a mixed bag. So we’ll have folks that come to us that from the beginning, like while they were in school, they had the expectation that they were never going to pay back these loans, that they were either going to die with them or go towards a forgiveness timeline. And then we’ll have some others that had an idea, but the options within the Fed system are really complicated for anybody to review. And so they thought they had an idea, or maybe they weren’t as familiar. And now that they’re looking at it, they’re kind of panicked. You know, they don’t know what the next step is.

Stacey Cordivano 4:22
Okay, I think that’s a perfect segue. So when I graduated, I’m dating myself here. income driven repayment wasn’t really a thing. So I would love to dig into, like you said, all the different confusing options that people have.

Meagan Landress 4:35
Sure, there’s really maybe two different ways we can look at repayment in the Fed system. There’s income driven plans, and then there’s amortized plans which that just means that they take your balance spread out the amount, the interest and the payments over a specific period of time, so not based off of income. So the the amortized plans are a little more straightforward. We just pay off the balance with the within either 10 too, as far out as 30 years, the income driven options are a little more complicated. There’s four, in a lot of times, people graduating right now will have access to all four. One of the plans that’s a little limited is called Pay As You earn. And that’s if you had any loans outstanding before October 1 2007. So that plan mostly available to folks who are graduating now or recently, but if we had loans prior to, then that’s one we don’t have access to. But they are based on either 10 anywhere between 10-15 or 20% of one’s discretionary income. And they’re all a little bit different on how they operate. And if they consider a spousal income, or if there’s an option to not include spousal income. So the nuances of those plans get a little tricky pretty quickly.

Stacey Cordivano 5:48
Okay, so as far as the income driven, you said, there’s four plans, can we just kind of run through those for quickly and kind of give the highlights and maybe like, why someone might choose that option?

Meagan Landress 6:02
Yeah, so income driven repayment options would be a really great option to consider or a really great path to go with your student loan situation, our rule of thumb is if your balance is 1.25 times your annual income. So if your balance is generally greater than your annual income, and will be for the foreseeable future, going an income driven path could make a lot of sense mathematically. And from a financial planning perspective, it could help free up cash flow for other things. So if you’re in that bucket, one of the four income driven plans will be what you have to choose between. and our thought process, if we’re going on an income driven plan, we’re not really treating it like a debt anymore. And this is because we’re potentially going to be pursuing a forgiveness timeline, which each one of these income driven plans have to either 20 or 25 years. And we’ll talk about those technicalities in a second. But our thought process going income driven is we want to pay as little as possible to maximize how much we can get forgiven. So the two lowest income driven plans are called REPAYE and PAYE, or pa ye. Those two are both based on 10% of discretionary income. And a lot of times I’ll have questions like, Well, why is there two and what’s what’s the difference. And that’s really the only similarity those two plans have the differences between the two. So repay is a plan that has forgiveness after 25 years of repayment, whereas Pay As You Earn is 20 years. So pay as you earn can be really attractive for a shorter timeline. The other difference between the two, repay does not allow us to exclude spousal income from our payment equation. So if you have a spouse, they don’t have student loans, their income is going to be factored into your payment if you’re on repay. Now pay as you earn allows you to exclude spousal income if you file taxes separately from one another. So that’s oftentimes a conversation we have with folks to see, you know, does that make sense? Does the cost of filing taxes separately, do they does it outweigh the benefits that we have for making our payment as low as possible? Those are the two big differences between the two. And then one other difference is repay has a really interesting interest subsidy, which is where any accrued interest or interest that our payment does not take care of that will grow our balance over time, it’ll just sit in this accrued interest bucket for the the student loans repay, we’ll waive half of that over time, and if the unpaid accrued interest, so that can be very attractive for someone who’s not sure if they want to go this forgiveness path. But they also can’t afford a really high payment right now, it can keep that balance as low as possible until they either decide to go really aggressive at it. Or they could continue on towards forgiveness, maybe switch to pay as you earn for the shorter timeline if they wanted to. So those are the big differences between those two lower income driven plans. Then there’s also Income Based Repayment or IVR. And this is based on 15% of discretionary income, 25 years to forgiveness, and the oldest one on the block is called income contingent repayment, or ICR. And this is based on 20% of discretionary income. So it’s one of the most expensive plans. It’s usually not something we’re talking about with folks, but it does exist. That was the first one that came about in like the 90s. But also lesser known, I don’t think a lot of people knew about it even then. So lots of nuances.

Stacey Cordivano 9:36
Yeah, it’s already very clear why you need help choose choosing one of these options. Now I have a question that I have not heard answered. If you choose a forgiveness plan, what happens if you stop working, A? Or B, you’re unable to work?

Meagan Landress 9:54
So if you’re on just income driven and you’re you’re going towards forgiveness, The payment is based off of income. So you don’t have to be a veterinarian to be on the income driven plan, you don’t even have to have income. So if you, you know, take a couple years off, or if your income is dramatically reduced, then our payment will be reduced. And as long as we make payments based on that income, it doesn’t throw off our timeline towards the forgiveness, only program that it would throw off is what’s called public service loan forgiveness, if someone’s going towards that 120 payment threshold for forgiveness by working in a public service setting. So like a nonprofit or a government entity, if we’re not working for that entity, then those payments during that time won’t count. But that’s the only thing it’ll throw off.

Stacey Cordivano 10:44
Got it. Okay. I didn’t realize that. I had a traditional amortize amortize … I’m not sure that’s a hard word, amortized loan. And it was set for 30 years, and I just sort of was told and believed that I would have them for the rest of my life. And my husband and I worked together to make a plan to pay them off early. And once I did that, I didn’t realize what a weight they were on me, which is why I feel pretty strongly that this is important for veterinarians to learn about. So where does the psychology of having a giant loan and like maybe even one that’s growing potentially, depending on the plan, you choose, like, where does that play into decision making? And how you guys help veterinarians?

Meagan Landress 11:28
Yeah, I think the weight of the debt definitely has a psychological effect. And just what we’ve been taught about debt historically, and what we’ve been taught is that debt is bad. And we need to pay it off as soon as possible, like our hair’s on fire to knock it out. with federal student loans, though, it’s a different ballgame. And so we have to treat it a little bit differently. So for an example, let’s say, I’m working with a vet who has about 280,000 of student loan debt, federal debt, and their income is about 100, might get up to about 120. That is a clear forgiveness case to me, you know, mathematically, it’s going to make a lot of sense to go towards that forgiveness path. Mentally, though, I know, that’s really hard to think about knowing that we’re going to pay as little as possible on this debt until it’s forgiven. You know, psychologically, that doesn’t make sense based on what we’ve been taught. But so mathematically, it’ll make sense how I tell people to maybe think about it, if that’s the path we’re going is think about it more so like a tax on your income for the profession you chose. So our payment is going to be based on you know, 10 to 15% of your discretionary income. So instead of thinking about it as a debt, and something that we need to put a lot of cash flow into, or try to pay down faster, we just think about it as a tax on our income for that period of time. So 20 or 25 years for the profession we chose. And so that’s a little bit more digestible, versus constantly thinking about the balance. And yes, the balance will grow. Don’t look at it. But you know, that forgiveness path, whatever is leftover after that timeframe will be forgiven. And so it’s definitely a different way to look at it. But I think that sometimes helps people digest it a little better, if that makes sense.

Stacey Cordivano 13:20
Yeah, no, it does. I hadn’t really heard it put that way. And yeah, I’d have to ruminate on that one, it might change my thinking on it for sure. Before I forget to ask, how is the discretionary income determined?

Meagan Landress 13:33
Yeah, so it starts with adjusted gross income, which is your gross income minus any above the line deductions. So that would be if you contribute to 401k, or HSA, those are pre tax deductions that reduce your adjusted gross income. So they take that. So that’s also an another topic point we talk about is, you know, contributing more to retirement and building your wealth, we’re sitting on the same side of the table, as you know, that’s a great move, it’s also going to help our student loans because it’ll make our payment a little bit less. So that’s the first number and then what they do is they subtract the poverty line for your household size. It’s actually 150% of the poverty line. So it’s weird calculation. Really, what you need to know is adjusted gross income is the derivative or what it’s pulled from, and then that’s what they calculate the payment off of.

Stacey Cordivano 14:25
Okay. So then you mentioned saving for retirement, which is obviously very important in general, but we have not yet talked about the fact that you have to be saving for what is known as the tax bomb, right?

Meagan Landress 14:38
The dreaded tax bomb. Yes. So what that is, is the the income driven plans as we know now, whatever balance is leftover is then forgiven. The IRS. Currently, I’m going to come back to this but currently recognizes that forgiven debt or canceled debt, as taxable to you as income In the year that it’s forgiven. So let’s say we get, you know, 50,000 forgiven at the end of that timeline, they send you a 1099 for that, and act as if you had made that as income in that year, you have to pay income taxes on it. So part of our planning is to not only keep our payment as low as possible over time being on inefficient income driven plan, but also to save for that tax implication. What’s very interesting about this topic is this tax implication does not exist right now. And what I mean by that is the most recent stimulus package implemented the language that anybody who got student loan forgiveness, or cancellation between now and December 2025, would receive that forgiveness tax free. So I know that probably doesn’t help a lot of people who listen to your podcast, because it might be a little further out. But that can really set a precedent to where the expectation is that student loan forgiveness is tax free. And this isn’t a new conversation, either. Congress had been talking about eliminating this tax implication before we even knew about COVID. So this is a very positive step in that direction, we just need to see if they’re going to make it permanent. But right now, we’re still advising people to save to be conservative and prepare for this tax implication, in case it is still there.

Stacey Cordivano 16:19
Okay, so do you guys work with people, as far as their financial planning also, or sort of in tandem with you suggest they find a financial planner for themselves? Or How does that all kind of play together?

Meagan Landress 16:32
Yeah, so we we work in tandem. So we are our bread and butter is the student loan planning. That is everything that we talk about on our calls is going to be in regards to the student loans. But we do talk about the importance of saving for this tax implication, we calculate the estimate of how much that tax implication might be for you, and how much per month we would have to save for it. We oftentimes work in conjunction with someone’s financial advisor, or we make suggestions on how they can find a qualified advisor if they wanted to work with someone on the investment side, or the saving side. Or there’s also like, Do It Yourself approaches like, you know, just opening an account with a brokerage firm or using a company like like a robo advisor company, for example. Got it.

Stacey Cordivano 17:18
I’m curious, do you have any examples of people that you’ve helped that were maybe making like major mistakes, and now have a whole new plan after working with you?

Meagan Landress 17:29
Yeah, so I had a really fun conversation with a young lady and her mom was on the call, she had just graduated, she was, well, maybe her mom was more so convinced that they were going to be very aggressive with her loan balance from the get go, that she was going to pay it off within 10 years, when her balance was forex, her income at the time. So very large balance in comparison to her income. To achieve that mom was thinking that she would just stay home, live with mom for the next 10 years and save on other expenses. I could tell my daughter was not super excited about that. So we talked about the difference between taking that really aggressive route, we did the math to show like cost wise what that would look like, what it would take. And they already knew that they could do it if there were no other expenses that she was really responsible for, for the next 10 years. And then we talked about the forgiveness path on Pay As You earn. And we looked at, you know, yes, it is double the timeline, it’s 20 years, but our payments are significantly less, even though we have to save for the tax implication, the total amount that we have going towards the loans is significantly less than what we were were originally thinking about. And then the other big benefits to this was that she can move out. She doesn’t have to stay with mom, but she can also start her life. Now she can start saving for retirement now. She could start building wealth, instead of being student loan debt free in 10 years, starting from scratch at that point. So the huge advantage was cashflow, flexibility, and just leveraging our money better getting a head start on saving for her future, which she wouldn’t have been able to do if she went towards that aggressive path. So I thought that was a really fun, interesting case. And I think she was super excited at the end of it.

Stacey Cordivano 19:21
Yeah. Did you officially convince Mom?

Meagan Landress 19:24
I did convince mom. Yeah, the numbers do not lie. So yeah, she was happy about it, too. And what’s crazy about that is the total cost when we added up how much she would pay, including interest over the 10 year timeframe, compared to the total cost of how much her monthly payments would be over the 20 years on pay, and what the tax implication would be, that was actually less than the total cost of the 10 year plan. So mathematically, it definitely made sense to go that forgiveness path and so that really spoke volumes to mom because she was thinking it was going to cost More to go that route, when actually it was a lot less, which was, I think shocking to her.

Stacey Cordivano 20:06
I think you guys have a calculator available on the website. Is that correct? Yes. So before people even like reach out to you, there is a way to sort of play around and I know the VIN Foundation has a student loan estimator as well for free. When would you recommend that any veterinarian or student start speaking with a student loan planner,

Unknown Speaker 20:26
I think there’s definitely those free resources online. On our website, we also have a huge blog that talks about anything related to a vet that you can search for questions about student loans and planning, I think the right time to reach out to someone for more customized help would be if you have any doubts in your plan, if you’re not quite sure, if what you’re looking at or what you’re calculating is correct, or you just want a second opinion, that’s where we can come in. It’s also helpful if you have some complexity to your situation where, you know, maybe income isn’t just a straight line where it’s going to start out here and be pretty consistent going forward. That’s kind of tough to calculate, because these plans are based on income. And if we don’t know what income is going to look like that can make a tough decision. And also when there’s spouses in the mix. That’s where things get a little more complicated. Not that you should ever be scared to get married. I hear that all the time. And you don’t need to be, you just need to know how to pivot your plan to make sure that it’s still on course with what our goals were. So when marriage comes into play, that’s another good time to maybe chat with someone like us.

Stacey Cordivano 21:36
Great. Yeah, that’s great advice. And I believe I hear this correctly, but I just want to clarify, you can switch between the different forgiveness plans, is that correct?

Meagan Landress 21:46
You can, and it doesn’t erase your years towards forgiveness, which is great.

Stacey Cordivano 21:50
Yeah, that is great. Okay, so speaking of reaching out to you, I looked on the website, and I was actually really shocked to see how reasonably priced consultation is. And I guess my question is, what does a consultation sort of include, and how much how much goes into that?

Meagan Landress 22:08
Yeah, so we, we charge just a flat fee by debt level. So it ranges between 395 to 595, depending on how much student loan debt we have outstanding. And that’s just a one time cost that includes a one hour console with one of our consultants, the information that we asked for in advance, there’s a small little questionnaire you’d complete, that gives us a good idea of your financial situation, some details on your loans. And then we ask, there’s instructions, we give you to download your federal file from the Fed system. So we could see the guts of the loans. So that’s kind of the homework beforehand. But on that call, we walk through really any which way we could look at your student loan situation, all the different repayment options, we’ll review. And then that helps us narrow in on the most optimal plan based on your goals, mathematically what makes sense, and you know how to pivot over time if life changes. And so by the end of that call, we have a plan. And we have a plan of action. And then we talk about how to implement that. So if we have to apply for a different plan, we talk about those steps. If there’s any other paperwork, we have to complete, we discussed that and then comes with the full write up after the call. So a recap of our entire conversation. So it’s something you can always refer back to including the instructions on how to implement the plan, and then any resources that could be helpful. And then that also comes with six months of email correspondence. So if you had any follow up questions after the call, or you got weird correspondence from the service or something, you can always reach back out to us and we’d be happy to help during that timeframe.

Stacey Cordivano 23:43
Great. I really appreciate all of the help that you’re providing to veterinarians. It’s obviously something that is very much needed. I ask all of my guests, what is one small thing that has brought you joy this past week?

Unknown Speaker 23:57
Oh, this past week. So my mom’s birthday was last week, and I’m a big Braves fan baseball. So we we actually took her to a Braves game. And that was on Friday. And if anybody on here is a baseball fan, the Braves twenty to one. And they hit five home runs in this game. So my mom was having a blast, because you know, she hasn’t been to a game in a while. And they hit five home runs. So it was really fun.

Stacey Cordivano 24:24
Yeah, that’s awesome.

Unknown Speaker 24:25
We’re gonna have to take her to every game going forward, so you can continue to win like that.

Stacey Cordivano 24:30
That’s great. That’s great. Well, again, I appreciate it. I think this is really important stuff for the well being of veterinarians and just being clear moving forward and in their path and career. So I appreciate your time and expertise.

Meagan Landress 24:44
Thank you. Thanks so much for having me.

Stacey Cordivano 24:47
Okay, so I have not been a huge proponent of IDR plans because the thought of watching a loan balance grow terrifies me and I cannot imagine the weight it has on a veterinarians overall well being I have to say though, Megan had a great way of thinking about this, and considering it more like attacks than alone has definitely made me rethink my stance. I fully believe that the only way for someone to come up with the right repayment for themselves is to get the help of someone who is very well versed on the subject, whether you call Megan or anyone, student loan planners or use another company, definitely look into your options. And if you’re in school, do it now. I promise I’m not being paid to say that I just, I’ve lived debt repayment, and I’m not sure I did it the right way. But having control over the matter made a big difference and a plan really helped me. So thanks again to Megan for her time and many, many thanks to you for your time and listening. I hope you got a few takeaways from this one. Please follow the whole veterinarian on whatever podcast platform you listen to and also find me on Instagram @thewholeveterinarian. You can also sign up for the newsletter on thewholeveterinarian.com if you don’t want to miss anything, I send out an email once a month. So have a great weekend and I will talk to you again soon.

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