Student Loan Forgiveness 2022 EXPLAINED | EP 125 (Part 1)

Woohoo. The government's gonna wipe out your college debts. You can finally afford a home. Alright, well first two things. Number one, in the time that it took you to download this episode or buffer it if you're watching it on YouTube, then the home that you've been watching on Zillow, it may have already gone up 10,000 bucks. And that's the money you got for the student debt. So there's that. And then number two, look, I promise I'm not going to be that snarky this episode. I'm actually here to give you the recent and current information because it's really confusing and there's some good news for some of you out going to help summarize what the hell's going on with this student loan forgiveness. Let's do this. The housing market and the financial market's changing all the time. So we're going to be giving you updates twice a week on this channel. Stay tuned. Hello, what's happening? My how to buy a homies looking for a handout. Who wants free money? Free money so you can finally afford to buy a house. What's up gang? It's David Sidoni and I'm your first time home buyer champion, your king, your all around numbers nerd. Here to help you break down the facts and figures of this whole student loan thing. Now here's one of my favorite facts and figures to start. Did you know that the amount of the student loan debt in America has grown to roughly the size of the economy of Brazil or Australia? And those are not little places. It's Bazonkers. Since 1980, the total cost of both four year public schools as well as four year private colleges, it's nearly tripled. And that even accounts when you're putting inflation into the equation. So there's been a lot of talk about this whole student loan forgiveness and now it's actually here. So what's going on? Well there's so much information. This is going to be a two part episode. This first episode is to help actually explain who is eligible and then how you use the money and then to see how this can help you in your overall financial plans. But mainly helping you pay off your debt while you're researching buying a home. Because that's what you're here for. So we're going to see if we can use this free money to help you stop being a renter. And then part two is going to be the next episode. There's so much. I got to do it in two different episodes. So for many of you, you're going to find out that this forgiveness, you're still going to need to work a plan with your student loans that you have remaining to qualify for a home loan. Then for many others of you, you might not qualify at all for this forgiveness. So we definitely need a plan. But look, don't worry, it's not as arduous as you think. Oh, you like that I use the word arduous? I could use some other ones. How about onerous? How about impossible? Or inconceivable? Shout out to my boy, Vasini. Look, the main thing you gotta understand is no matter where you get your money, if you got free money coming in, it's bitchin'. And of course, the reduction to any loan is awesome and really helpful when you're looking to buy a home. But remember, when you're buying a home, the banks add up all of your monthly payments, including all your debts, not your gross total debts. Then they're gonna decide if you can afford the monthly payment for that new mortgage based on the income that you bring in every month against the monthly payments that you have that go out. So look, any free money that you have that comes in that just reduces your gross debt, it's not actually going to help very much for you qualifying for a loan. You need to restructure the loan so you have a lower monthly payment that helps you qualify for more loan. We're going to talk about how to help you doing that now. And if you don't qualify, we're going to help in part two of this series. Okay, here we go for part one. So we're going to find out who gets the money, who gets these freebies, how's this whole thing going to work? And how's it going to help you get a home? Remember, if you find out, you're not eligible. Part two, that episode's for you. So stay positive. Okay? I'm just giving the facts, I'm just reporting, so no politics. Let me just explain the math behind how this works. They're trying to help as best they can because the government has figured out what we've all known forever, that college has become a business. The current administration sees this skyrocketing cumulative federal student loan debt. It's 1.6 trillion. That's 2 million with a T. And it's rising. So we've got 45 million borrowers out there who are trying to get any kind of help. It is something they're trying to do to help out with the middle class. But what we Find out is that not everybody with student debt is going to qualify. Now these credits are mathematically designed for something called Pell Grants. Pell Grants are small government grants and here's what you have to know about how they work. Pell Grants been around since the 80s and they used to cover nearly ready 80% of the cost of year college degree. Yeah. Now that made my video producer laugh because 80%, he knows how small Pell Grants are. Take a look at this chart. You can see in the 80s Pell grants were 6,000 bucks and that did cover 80% because the average tuition for four years at a public university was eight grand. See where I'm going with this? This graph shows that the gap has widened quite a bit. But look at that bottom yellow line. Pell Grants are still only at $6,000. Look closely at that top number. The, the way out of control price that they're talking about. They've got the, the average price which is an actual number for a four year degree at a public university. It's just under $25,000. Again, see where I'm going with this? Okay. That comes straight from the White House and this is them trying to fix the Pell Grants which they should have because they stayed the same for all these years while everything's been going up again. This isn't politics. It's not red or blue or it's not opinion. I'm just going to give you the facts. You can work with the system then and see where you are on this socioeconomic ladder. Then you'll be able to look at the numbers and see what you got to take advantage. Now the second crucial number is determined on the job that you get with the education that you got. And then we're going to figure out what's your income and who is going to get this forgiveness from the government. So first let me get this out of the way. If you're still a dependent and you're still like on your parental dependency, if you're listed as that, then that's going to be based on your parents income, not yours. For the rest of you who are out of school and got super excited when the White House announced this. Look at this chart from the White House. Remember this all came from the Pell Grants. But this chart shows you where the relief is for the borrowers is going. 87% of that relief is going to people who make less than $75,000 a year. Nearly 8 million people. Because this just came out this week, they're saying 8 million people are going to be eligible for this. But if you heard those numbers, it might be a gut punch to you when you saw where this debt forgiveness came from. And that originally from those old Pell Grant numbers and based on the income qualifications that are out there, the two huge numbers, this whole free money is, number one, it's based on them trying to help people whose college only cost 25,000 bucks that anybody out there. And that's for every year, not for like one semester. And then number two, your income that you make as a college graduate, if it's more than $75,000, you're not one of the people they're really targeting. So according to the info, individuals who are single and earn under $125,000, you're going to qualify for $10,000. If you're married and you file your taxes jointly and Your income's under 250, then you qualify. But this chart direct from the White House, it revealed that only 13%, only 13% of the people that are going to get this cancellation dollars, they've got only 13% of the people making 75 to $125,000 as an individual, only 13% of you are going to get some of that money. 87% of that is going to go to people making $75,000 or less. Okay. So if you qualify, the good news is that this debt relief will not be treated as taxable income. That's awesome. It also is supposedly going to put an extended pause on the pause we've already had on student loans. Right now they're saying that there's going to be a pause until January of 2023. So that's good news for everybody till the end of the year. Now, if you do qualify, the bad news is you have to navigate the jacked up federal loan servicing system and keep a close eye on your accounts and your credit report and anything else that the government could screw up for you. Now, as I said, I'm getting this to you guys as quickly as I can right off of the news. Pulled this right from the Internet. So there's a ton more stuff they're trying to figure out and you know, they're going to be working on making it more manageable and fixing current loan repayment systems. But all that's in the works and it's probably subject to change several, several times. So let's take a look at who this forgiveness program is targeting. Now, according to the White House, Take a look at this one. Some of the stuff they're trying to do to help simplify the loan repayment programs for people. And none of this stuff has worked out yet, but they'd like it to look a little something like this. A typical single construction worker making $38,000 a year with a construction management credential, they're only going to pay $31 a month in the new proposed program compared to the $147 they pay now under the new most recent income driven repayment plans. So those plans that they make for you based on your income, that supposedly give you the payment that's supposed to work out best for you, the plan they've got right now is $147. Under the new plan, they're only going to pay 31 bucks. So that's savings of nearly $1,400. Second part of the chart there talks about a public school teacher with an undergraduate degree making that average 44,000 dol thousand dollars a year. Instead of paying $197, they're going to pay $56. That's a savings of 1700. And for your typical nurse making $77,000 who's married with two kids, instead of paying $295, they're only going to pay $61. That's an annual savings of 2,800 bucks. So that's pretty significant. So if you're graduated, everyone's pretty stoked trying to figure out how to get this extra $10,000 or $20,000 for two of you. But remember, that's going to be subject to those income maximums. As far as the repayments that they're talking about for the construction worker and the nurse and the teacher, we're waiting to see how that stuff all gets lined up, but hopefully that'll work out for you, too. So for today, the one thing that we've got a good handle on, I'm going to give you all the current details on this program, which again, is designed for individuals who make $125,000 or less, couples that make $250,000 or less. But bear in mind 87% of this cancellation forgiveness money, it's already earmarked for the individuals that make $75,000 or less, and couples who make less than 150. So for the rest of you who are out of school and adulting like a boss, part two of this series is going to be in the next episode, and that's going to help you so you can figure out what you can do to manage this debt and still be able to buy a home. I did take my time and I read through the entire. Yes, the entire White House government page. Oh my God, I'm tired just thinking about it. So what I did was I researched a whole bunch of other places and one of the best places I found for frequently asked questions was a New York Times article on this. So let me give you some rapid fire frequently asked questions at the Times help figure out because they had people who read through all this too. You only have graduate school debt, but you got a Pell Grant when you were an undergraduate. Are you eligible for an extra $10,000? Yes. Yes, you are. You had a Pell Grant, but only for one year. Are you eligible for $10,000? Yes. At the time you only qualified for a partial Pell Grant. Are you still eligible for $10,000? Yes. How will the powers that be know that you have a Pell Grant so you can get your money? Well, this is a government thing, so. Ever been to the dmv? How about the post office? Yeah, this is a government thing. Ladies and gentlemen, boys and girls, supposedly they're already working on improving the online accounts to make your pell history clearer. So who qualifies for this as far as your type of debt? This is for federal student loan debt. Private loans, they're not eligible for this. That's a federal family education loan. If you're on one of those loans and it was eligible to be on pause during this pause time, then you are eligible for this forgiveness. There you go. I don't know what those are. But you do. What if you were a student this year? Do you qualify? Yes, you do. But one of the things they've got is if you were a dependent during the 2021 school year, your eligibility will not depend on your income. It's going to depend on your parents income. So what if you're like all my friends who went to college and didn't get their degree? You majored in keg stands and beer bongs. No, you are not disqualified. Come on in, everybody. Okay, what's the first thing you need to do if you qualify? Well, start by talking to your lone people. I'm going to say it over and over and over and over. Talk to your loan people, make sure they have your current address. Make sure they can get a hold of you. The Department of education actually supposedly has on their webpage something called who is my loan servicer? How about that? So check that out and we're going to talk about at the end, but make sure that you double check and make sure who your Loan servicer is by you researching it, not by just answering the phone. We'll get to more on that later. Okay, how's this happen? Does it happen automatically? Well, it kind of depends. If you're already enrolled in some kind of income driven program, then they probably have all your information. But you know, like I said, as of now, we're at the end of August. They said 8 million people may, may become eligible for this automatic relief. So I definitely would check with your loan servicer and your loan provider and see if you're on the list. Okay, here's the big one for buying a home. If you're eligible for this and you've got more than $10,000 in debt, how is this going to be brought to your loan? Is it going to affect your monthly payment? Well, supposedly your payments are going to be recalculated. The specifics haven't been released yet, but you know, there's a couple different educated guesses that people are doing. The main thing is make sure it's just not taken in and brought against your gross. If you're already in one of those income driven programs, a lot of times what they're doing, their payments is based on your discretionary income and your household size. Discretionary income is usually understood as the income that's left over after you pay for the basic needs like food and rent. So in this world of student loans, you need to find out how are they figuring out what your payment is? And with this $10,000 that come in, if they just put it against your gross, is that going to reduce your monthly payment? That is extremely important if you're excited about this money coming in and hoping it improves your chances for getting a home loan. So whatever you do, make sure that you talk to them and figure out is this going to be going towards your principal and reducing your payment as far as when you could sign up for all this? Not released yet. They're just super excited to do the press release. They got that out there. What about people who are asking if they qualify even though their loans were in default? Yes, Defaulted borrowers. If you were eligible for the payment freeze that happened and you got that pause, you should be eligible for this program as well. And then we get to the two big questions people want to know about. Okay, is this going to be here forever and is this going to keep happening? Well, as far as just getting reversed, hey, I don't know. It's crazy world. Any elected official who would try to sue and change this law, they run the risk of infuriating their constituents by adding, you know, $10,000 back on their loan. But who knows? If there are a bunch of constituents that find debt cancellation offensive, then if enough of those people can figure out how to get their voting together and change the laws, it could change anytime. Welcome to the legal system. So for those of you wondering if this is going to be a regular thing, the first of many. The only thing I can tell you is again, I have no dog in this fight, no politics. All I can tell you is I sat back and watched it. And this problem has been going on for years. We have watched colleges inflate their tuition at. But you know what? I bet the people who are on the colleges are the same people who are the landlords. If you go back to the 80s, like their graphs are almost the same thing. It's been ridiculous. And no one has stopped the landlords from doing it and no one has really gotten in and stopped because the colleges are private businesses, many of them. Therefore, what they have done is been unable to reduce the crazy skyrocketing tuitions. Therefore, I wouldn't count on this happening again. First thing you need to do to find out if you qualify is check with your provider. If they're looking for any kind of proof, make sure you have all your tax returns ready. Remember, I'm giving you the information as best I can, but you should check with the education department, your loan provider, because this is the very, very basic information on college debt relief. And I am definitely not certified, licensed, or even partially qualified as a government employee in any way. I got no actual knowledge. I'm just your personal super geek with a microphone. I read the White House statement, I read a whole bunch of articles from trusted sources and then I regurgitated it all to you. So hopefully this was more palatable than you trying to read all that stuff. Something that you could listen to while you're doing your chores or watch on YouTube while you're trying to fall asleep. Made you fall asleep, didn't it? Good night. Well, I mentioned a little bit earlier, but I do want to make sure that you understand, be aware of scams. People are always trying to take advantage when these big programs pop out like this. The more freebies that happen, the more scams that happen. According to CNBC, in 2021, 29.8 billion, almost 30 billion in phone scams happened. I mean, from the PPP to the COVID relief to the IRS scams that are going on. My parents actually got caught on that 12 years in a row. So Be careful. Take care of yourself. Don't believe the scammers. Check with your provider first. Check with the Department of Education. And the last thing, if you're really trying to make sure you're not getting a scam happening, most of the time you can go back and check with your school and they'll give you the detailed information because you know they want to get their money. All right, you're still there watching on YouTube or probably already in REM right now having weird dreams about some guy talking to you about so those of you who listen to my rambling and did the research on your own, you figure out that you qualify. I say again, the main thing that you understand is no matter what, any kind of debt reduction is great. But when you're buying a home, the banks are going to be adding everything up and looking at your monthly payments, not your gross total debt debt. Then they're going to decide if you can afford the monthly payment for mortgage based on the income that you bring in every month against the debts that you pay out every month. So any free money that you get, if it's from the government or from your uncle or wherever it comes from, if it's just reducing your gross debt, that's actually not going to help you when you're qualifying for a home. So the big important part that I hope you take away from this episode is that restructuring your loan to payment, that's going to help you qualify for more of a home, which hopefully you're going to be able to do with some of the information you got here today or with some of the tips we're going to give in part two of this episode. Make sure you listen to part two, I'll give you all those tips and hopefully we'll get you in a position to lower your monthly payments and help you get in a position to buy your home faster. Help me out gang. Share this podcast with other people you know suffering from student debt. And don't let the emotions of debt or the old school thinking out there or any of your negative mentality, don't let any of those things keep you from starting right now. Start making your plan to buy a home. Even if you've got debt, assume that you're going to figure out a way to fix it. You're listening to this podcast already. You're already starting, which means you're already starting to figure out how you can get in control, how you can figure out how to manage your debt. The one thing I see that you can't control, that's your rents going up every single year. You can control your debt. And now that you've got started, you just need a plan. And there are going to be more plans coming for you in part two of this episode. Keep planning. Keep working. You can do this.