(Ep. 112) Feeling Frustrated About Your Student Debt? Here’s the Cost of Student Loan Complexity

Welcome to the Student Loan Planner Podcast. Before we begin, I want to let you know that Travis has received a new microphone and it wasn't quite operating properly. We're going to get that fixed for next week's episode, but just to let you know, Travis will sound different, but of course, his content is spot on, really good. Hope you enjoy the show. Here we go. On the Student Loan Planner Podcast today, we're going to talk about who profits from student loan complexity and how do you handle just the frustration and the emotion around being just very sometimes angry that student loan debt isn't easier to handle. You know, is student debt designed to make you scared? First, we've done surveys for our audience in the past that a ton of people say student loan debt delayed their marriage plans. I mean, in some cases, in extreme cases, people had fewer kids or no kids at all, specifically because of student loan debt. I mean, that's terrible. If you think about student loan debt affecting your personal family decisions, there's not something that's more personal than that. Even relationship decisions, I mean, that also can really be impacted by student loan debt. So student debt complexity has a really high cost. It's not just it's really high interest or something. There's a real cost to just not understanding exactly how to deal with it. Unfortunately, even from our mental health surveys, we found one in 15 have even contemplated suicide over student loan debt. Now, that, I think, is not just because student loan debt is complex, but also because it's so high and it's exploded in size so fast over a fairly short period of time. So did student debt in general used to always cause this much stress? Well, I have to say, debt has been causing stress for a long, long time. I do want to give you a little bit of, hopefully this helps you feel a little positive about what you're going through now, that it was bad in the past, in some cases much worse than in the past, and this, you know, is not really probably going to help you that much, but it's just good to think about, you know, in comparison that maybe things are not as bad as you feel like they are. So think about Hamlet. In Hamlet, one of Shakespeare's major works, one of the characters warns us that you should neither a borrower nor lender be, right? So there's a warning from the 1600s that debt is a dangerous proposition. If you think about debt, there were debtors' prisons in the U.S.A. back in colonial times. In fact, here's a fun fact, you know, we had Georgia in the news a lot with the deciding control of the United States Senate. Did you know that the state of Georgia was founded originally as basically a debtor's refuge? So back in the day, if you were in debt, you could be thrown into prison if you didn't make payments. And so James Oglethorpe, the founder of Georgia, set Georgia up so that basically you wouldn't have to go to debtor's prison if you owed somebody money if you were in Georgia. What a great way to attract a lot of people in a hurry, right? If you're running from your debts, it's a great place to go back in the day. Now, the English would have these debtor's prisons and you would get tossed in if you didn't, if you were not current on your debt. You know, in the ancient world, it was even more extreme. You might remember that, you know, from like, if you ever watched like movies about ancient Rome, if you had a debt that you didn't pay, you and or your whole family could be sold into slavery. If you watch mob movies, you'll see a lot of enforcers. What are they trying to do? They're trying to get people to pay their debts. A lot of times these are a little different kinds of debts, maybe gambling debts or something like that. And you know, you might have heard of the term kneecapping somebody. If you break someone's kneecaps, it's pretty painful. It doesn't kill them, but it certainly makes them want to pay their loans, right? So I mean, as bad as student loan debt is, and it is bad, you know, at least we're not having to deal with mob enforcers, right? It's not to that level. Rocky Balboa, I mean, when I was in Philly, he's a hero, right? But if you think about it, he helped collect the loans for the mob. So, you know, I mean, debt's a scary thing. It doesn't matter how nice of a face you put on it. Student debt can be pretty terrifying and student debt is extra terrifying because of how complex it is. There's also other kinds of debt back in the past that's not even debts of money, but also debts of time. So in a positive kind of debt, if you take the military route and the government pays for your school, then you owe the military several years that you have to give them of your services in exchange for them covering the cost of your education. And then, you know, in a more negative example, think about indentured servitude. That was how really a lot of poor people paid for their trip to America back in the day, is you had to agree to sign up for seven years of hard labor in exchange for having your passage paid for. So that's basically kind of a debt too. What about other money kinds of debts? Well, think about mortgage debt. Back in the day, back in 2008, masses of people just had to give back their houses to the banks because they couldn't make the payments. And student debt, you might say, well, it wasn't nearly as bad back in the day. And you'd be correct. The problem though is student debt being bad today is not necessarily all 100% bad. And what I mean by that is if you think about student debt back in the day, it was limited to people with good credit and people who could access financing through the system, which was mostly limited to white men. Now we have some of the most diverse professional fields in history. And a big reason why is because we have the student loan program that the government supports and backs up where the government does act as the underwriter and doesn't underwrite carefully the amount that you can borrow. Now that's not to say the system is good, that you couldn't have a system that also supports diversity and professions and education without crippling people with student debt. I'm not saying that. I'm just saying that, you know, the student debt being very difficult to access in the past is not necessarily all a good thing. Think about the government's response to Sputnik. That's one of the big steps the government took was entering into the field of student loan debt to try to encourage more people to go to college because they were so terrified by this system. So over time, the government got more and more involved in the student loan program and probably for a good reason, right? To try to incentivize people from diverse backgrounds and low-income backgrounds to go to school and not have to feel burdened like they couldn't afford it. And they also got involved in help setting the interest rate because if you had pure underwriting based off of the credit worthiness of the borrower, you might have people saddled with massively high double-digit interest rates, which would make it really difficult to go to school. So that's why the government got involved in setting the interest rate. So think about credit cards. A lot of people kind of say, you know, a lot of people get really frustrated with the interest rates on student loans. And one positive thing that we can say is that it is a lot cheaper than credit card interest. Now that's obviously not necessarily saying much, but why are student loans at the interest rates that they're at? So think about credit cards. Why is the interest rate like 15, 20, 25 percent? It's because it's unsecured credit. And when you have unsecured credit that's easily dischargeable in bankruptcy, it'll trade for pennies on the dollar when somebody just defaults on it and stops paying. So based off of that default rate being so high, that's why they have to charge such a high interest rate to also make a profit. If we had student loans set up like credit cards, then people would be charging, being charged super high interest rates. People do have an incentive not to default on credit cards or mortgages because you don't want to mess up your credit for the future, right? Why are mortgage interest rates so low? It's because the bank can take your home away and then they can sell it if you stop paying. And so the credit risk is really, really low for a home because it's secured by an asset. Whereas with student loans, that's an unsecured asset because unlike the 1600s, the lender cannot cause you to do indentured servitude for them to pay them back if you stop paying. The idea behind allowing people to not be able to easily discharge student debt in bankruptcy was to give these extra protections to lenders to make it so that the interest rates on these loans would be lower. You could also say that this also resulted in big profitability to banks, right? With this student loan system that we have, complexity benefits a lot of people. We're going to get into the biggest beneficiaries of who benefits from this complexity in a bit. One thing that I hear from readers a lot, they'll say, why does the government get to pay 1% on their debt and I have to pay 6%? That's criminal because I'm getting a 30-year mortgage below 3%. And again, it's because student loans are primarily a credit risk product, whereas something like a mortgage is credit risk plus having an asset that's secured that's very understandable and somewhat uniform in this underwriting standards. So yeah, 6% is high. Actually, if you look at the average private debt in the private markets for what they charge people, someone with perfect credit tends to get charged 5% to 6% for initial originated loans. The average for people overall that are asking for private loans is actually 8% to 12%. Because that's debt going to someone that's not established yet. So the rates are often, they're not nearly as low as you might think. So if you had no government involvement in the student loan system, dentists and physicians might get 4%, 5%, 6% for their loans for professional school, but then people from lower income backgrounds or people that don't have multi-generational wealth or multi-generational people and their families going to college, they would be getting charged double digit interest rates. In fact, the market price of the interest that you're being charged is not really all that different than what basically it is right now. Now you might say, well, they should subsidize it. Well, that's okay. Then that's a policy discussion. But I just want people to understand why the system is the way that it is, because it's complexity doesn't have to be scary. So like, why am I going into all this detail? Why does it sound like this is like a Travis rant or something? It's because I want you to understand the complexity of student loans and why the system is the way that it is. That doesn't have to be scary to you anymore. Once you have gotten it out of your system, these are the people that profit from the student loan industry. It's corrupt. It's messed up. It shouldn't be this way. You can get that off your chest. And then we can start thinking, well, how do we conquer this? How do we not have this affect big decisions like having a family or not, or buying a house or not, or taking that dream job or not? Because at the end of the day, student loan debt is something that you want to not impact you negatively. You want it to be a thing that exists, that you've got a plan for, that you put in the back of your mind, and then that you just live your life. Okay. The interesting thing too, is the fact that the government does set the rate at like anywhere from like six or 7%, instead of it being what the market would charge. That already means the government subsidizing student loan interest by billions of dollars and tens of billions, actually. And people don't even realize that. They think the government's making this huge profit off of the student loan interest they charge. And it's actually not true based off of credit risk. The government would actually be expected to lose money, even if they did charge the current interest rate without any of these forgiveness provisions. It's kind of interesting. Also, if you're going for forgiveness, the interest that the government charged you doesn't matter at all. If you're just going for an income-driven repayment plan anyway, and you're going for a forgiveness strategy, the interest rate to you is virtually irrelevant. Even though the interest does relate to how big your tax bomb is, it's never as big as people think it is, because interest grows at a simple rate of interest instead of a compounded rate of interest. And plus, a student loan tax bomb, you're paying, you know, 40% on whatever is forgiven instead of 100%. So you're even dealing with a fraction of the additional cost that the interest generates. Another thing that I find with student loan complexity is, because the system is so complex, because people see all the interest they get charged, people tend to overestimate how much interest they actually have tacked on. So it's bad, yes, but consider an NYU dental school debt that costs $500,000, or USC, or Midwestern, or, you know, I could really go into all numbers of private schools that cost that, but think about a dental school debt that costs $500,000 for the actual degree, like literally just that direct educational costs are $500,000. So about $25,000 on top of that will come from them raising tuition every year. And then about $77,000 on top of that will come from accrued interest over four years. And then another $15,000 of that will be loan fees. So that's a total of $92,000 of total finance charges, $500k for the cost of the degree, and then $25k from the cost of the tuition going up every year. A lot of times if you ask somebody how much were you charged for interest, I would wager that maybe 80 or 90% of people would overestimate what they're charged in interest versus underestimate it. That's kind of interesting because a lot of people blame the interest for their student loan debt when in fact it's really the amount that's borrowed, and everything kind of comes back to the cost of higher education is really ridiculously high, and it's just absolutely absurd. And we can talk about other things that do contribute to the cost of higher education for sure. We can talk about how the student loan system shouldn't be so complicated, how interest rates, we wish they were lower, but really it does come back to the cost of the actual product is outrageously expensive, and that has to be fixed before anything gets fixed really, because otherwise you're just tinkering around the edges and taking a Tylenol instead of stopping the bleeding. Now if they eliminated the origination fees and that $500k dental degree and they charged 3% interest instead of six or seven, then instead of having $600,000 of debt, you'd only have about $550,000 of debt at graduation. Now is that really a big difference? You'd be looking at, if you had to pay that debt back, you'd be looking at paying $5,500 instead of $6,000 a month for the standard 10-year plan payment. That doesn't really fix anything at all. That wouldn't affect you not going for income-driven repayment. That would not affect your ability to refinance that and pay it back easily. It's still a massive ton of debt that's really stress-inducing. So I get why people are frustrated with the interest. I get why you might be frustrated with how much interest that they charge you. But I just want to tell you that one thing that happens with student loan complexity is people feel like they have a lack of agency and a lack of self-control over their own situation. That can be kind of destructive because you do have control over your situation. If you know the rules, if you get the help that you need, you actually do have power over your situation. So that's one thing that I want to dispel. That is a myth that you can't control your own future financially, even if you're just in the worst shape ever financially. I've never ever even once seen a case where someone's student loans were the cause of their complete financial destruction in their life. Almost always, if someone is feeling stress from their student loans financially, you can overcome it. Some of the worst cases of financial stress I've seen from people are not coming from their student loans. It's coming from their practice that they bought a practice for that they're having trouble with because they bought it in a really competitive area, or they are having to pay alimony because they had a divorce, or they financed all these kind of big ticket items for their husband who is not willing to go get a job. I've seen a lot of that for professional women as bribe winners, in some cases, just being taken advantage of financially. And people don't really talk about financial abuse, but I've certainly seen a lot of it. Luckily, not the majority of cases by any means, but that does exist out there. So here's one email that I get from people that's, again, something that you have to kind of take ownership of and figure out how this happened to you so that you don't have it happen to you anymore going forward. I'll get an email from somebody who's just beyond frustrated. They're so angry because their balance, they only borrowed $100,000 for their school, but now they have $300,000. And a lot of times they'll send me an email and it's like, I want criminal charges brought up against my loan servicer. They've totally screwed me over and I hate them so much. And I have empathy for that person. I do. But just understand that that problem, it's not going to be solved by blaming the system, even though the system's screwed up. You should absolutely vent. You should be frustrated. You should say, this is freaking ridiculous. This should never be the case, but it's not going to help just attacking the system for being screwed up because you need a plan, not just saying the system's messed up. So how does that happen to someone? Because I just said that the interest wasn't nearly as bad as people think it is. Well, what will happen is somebody will take out $100,000, right? And then they'll put it into forbearance for several years, or they'll get into a situation where they're not paying very much. And then they'll maybe switch from a forbearance to a hardship deferment. And whenever you enter a forbearance or a hardship deferment or something like that, when you exit that, it causes the interest to capitalize, which means the interest gets added to the principal balance. So normally interest grows at a simple rate of interest, but when you're in financial distress and you have limited access to information about your best options, you might just call your loan servicer and say, hey, I'm having trouble making my payment. And the loan servicer is always going to tell you, just do a forbearance because it saves them time on the phone, right? So this person probably would call up the servicer, say they can't make the payment, go into forbearance, then they would exit forbearance, make some more payments, go back into forbearance. So a lot of times, if I were to look at someone's NSLBS file to look at their loan history, they might have 10 to 20 different forbearance or deferments on their record. And every single time they enter and exit that, they're compounding their interest. So yeah, six or 7%, if it's compounded interest, that's going to double your student loan balance every 10 years. So it's not surprising to me that someone's have had student loan debt for 10 years or so, and the balance has doubled or gone up even more compared to what they borrowed. So that's something that the way you just explain that is, hey, first off, you got to make sure that you get it onto an income-driven repayment plan, because then your interest is going to grow at a simple rate of interest instead of a compounded rate of interest. And then if you have this much now, I wish we could undo that. I wish we could talk about reducing the balance to back to what you borrowed, but they're not going to do that. And so what you can do instead is treat your debt like a tax instead of the debt, and then you can pay a percentage of your income and have it not stretch you out anymore. And as long as you keep making your payments, you're on a steady march towards forgiveness. And nobody ever jumped off the Brooklyn Bridge because of an income tax, right? New York City income taxes, I've heard they're really high. I know they're really high from people, friends that live there, but again, people pay their income tax rate because they like living in New York. You pay your student loan quote-unquote income tax rate because it makes sense to pay it as an income tax rather than pay a flat monthly payment to pay the debt off in full, because it just makes sense from what the system is set up as to do that instead of to do the alternative. And because you took a degree out in something you enjoy and hopefully make more money at than what you do with a bachelor's degree, that's a good decision, and you shouldn't be stressed out about that. It's okay to feel angry about your student loans. I want to just make sure that you feel like that's okay. If you think about the movie Apollo 13, Tom Hanks plays the commander Jim Lovell in that movie, and the character that he plays, he has every right to feel upset that he might die when one of the backup crew replacements stirs the O2 tanks and they explode, and then there are fighting conditions on board that might kill them all, and they have to hold down their feelings to solve the problem because it just doesn't help them get to where they need to be. So we're not all astronauts with nerves of steel. So finally, let's talk about who really profits from the student loan system, and really why is it so complicated, and who's the biggest beneficiaries in all this. I have to say, truth be told, anyone who makes a profit in the industry, I mean, so we're guilty too, right? Let's just be frank. A student loan planner makes a profit from the complexity of the student loan industry. We make a profit in the way maybe a CPA would make a profit off of a complex tax return statement. We didn't have anything to do with making the system so complex. That's one thing that I try to do. A lot of times, people want me to lobby for various things in Washington, and we do that in a very limited basis to just make sure that any kind of legislation or programs that are put forward aren't just really harmful to people, but it's something that I kind of feel like it's better, at least from where we're sitting, to not be complicit in the development of the complex system and react to how do we help you navigate a really messed up system. Again, much like a good CPA would help you navigate a complex tax system. It shouldn't be that way, but it's going to be up to Congress and voters and leaders to figure out what the system should be, and we're just going to react to it, right? So who benefits the most and who profits the most from the complex student loan system? First, I want to talk about universities. Universities realize that they have you just totally captive when they have got you borrowed for a single year for a four-year program, especially for professional school. You are stuck. They can raise tuition as much as they want. I've got a story I love to tell about the University of Washington Dental School. So their leadership, the leaders of that college, that dental college, they really messed up. They opened some clinics in a place they shouldn't have, they made some really bad business decisions for the college, and they literally blew up the school's finances. And so they blamed it on declining state support for why they needed to raise tuition, but really it was a series of horrific business decisions that really could justify all of the leadership there getting totally fired and never rehired anywhere else ever again. So it was the equivalent to, I don't know, the worst football coach you can imagine making like the worst contract decisions ever, and then blaming it on, I don't know, someone else, right, instead of taking accountability. So they jacked up the tuition like they doubled or tripled it over a super short amount of time, and everybody that was signed up for dental school at that program, they had no choice. They couldn't do anything because once you're in for like 100k, it's like you're going to leave with no degree. So that means that you're stuck no matter what. So that alone, the fact that they have a captive customer base alone should mean that there should be some regulation in what schools can charge and how much they can increase the tuition by, right? I mean, because if you're going to have a bunch of government involvement and no regulation, that's just a recipe for disaster, and that's basically the student loan system that we have. There's other things that matter for sure, and making sure that people have a good access to higher education, but there's no cost regulations virtually at all, and it's just mind-blowing that that is the case when we have regulations for everything else except for higher education, it seems like. You know, another story I had, there was a student that had this disagreement with the administration at his school, and they kicked him out with one year left to go, and he had to join another program and retake like two years, so he ended up with like $800,000 in debt. He should have only had like $400,000. So a lot of times students will reach out to me like super frustrated at what their deans are doing for their programs, and I say, you can always ask a question respectfully. You know, you can always just have a conversation with someone and just try to make sure that it's very professional, it's very calm, it's not accusatory, but be very careful what you say, because these administrators can really just do whatever they want to you, and it would be a disaster if they were to try to kick you out because you rocked the boat, right? You really do need to sort of keep your head down and get your degree if you're in a program already. I hate that, but you know, it's just reality. So universities love that the student loan system is complex, and they all caps love that there's no limit on borrowing. Next week we're gonna have an awesome guest, a New York Times best-selling author, and a New York Times journalist, Ron Lieber, who's got a book coming out about the price you pay for college, and one thing he says is the idea that higher education costs are going up at the undergraduate level is true, but it's also a little bit of a misnomer too, because schools keep raising their list price every year, but then they discount the heck out of it because they want a really high list price, whereas the net cost that you'll actually pay could be a lot lower because they are trying to maintain the illusion of quality. So that's so fascinating, and why is that the case? Well, for undergrads, the loan limits are super low, so a lot of the parents actually have to pay the list price or the net price, whatever it is, so that's what causes the discounting, is for people to actually have to carry the cost of it. For grad school, there's no limit on borrowing, which means there's not really room for negotiating because the universities know that they can get you to pay for the whole thing with student loans. So universities love distractions in the student loan conversation, and I might make some people upset when I say this, but student loan debt cancellation is just a massive, massive distraction from the really hard work of student loan reform and higher education reform overhaul that's needed to the system. This is the dream of every higher education special interest lobbyist out there to get more conversations happening about cancelling student loan debt instead of talking about how you need to regulate higher education, how you need to make sure these universities are not charging people $500,000 for a dental degree that are just putting it in the bank and just crushing a generation under student loan debt. $10,000 of student debt cancellation, could that do anything? Sure, it could help people at the low income end of the scale. If you do $10,000 of cancellation to people who are first generation, or communities of color, or people who are in default, or delinquency, that could really transform some lives. If you wiped out their debt and allowed their tax refunds to not be garnished anymore, that would be life-changing, right? But $10,000 overall for universal cancellation of that amount, again, it's just a total distraction. And universities want that because they don't want to talk about the system that they are beneficiaries of. So one time when I was in my mid-twenties, I did this retirement sort of from bond trading, and I traveled the world and went to like 40 countries. And one of the things I did was I was hanging out in Munich in Germany, and I went to one of the best universities in Europe that I was on their campus. And I'm walking around, and this is like one of the saddest campuses I've ever seen, like such a sad building, and like so commuter campus feel, where it's super pragmatic and doesn't feel like, you know, they care about what's on the brochure or whatever. And it's because it's funded by the state, but they have really good cost controls in place where the school has to just be careful with what they spend, and it doesn't matter if you have a beautiful brochure, because people are not being asked to sign up for massive student loan debt, so they don't have to care, right? So hopefully, you know, as we discuss like things like free public college, hopefully we can at least have a big part of the conversation be how do we constrain the costs of higher education too, because universities just want you to normalize the debt to sign up and not ask questions. Employers, that's another big group that benefits from the complexity of student loans and profits from it. To give you an example, let's talk about dental service organizations, aka corporate dentistry. This has taken over a lot of the field that used to be just mom-and-pop, small dental practices with single-person owners running the show. Now, you've got all these massive organizations that might owe 50 or 100 or thousands of dental practices, and they need a easy-to-acquire labor force to fill all these practices up with dentists, right? So how do you convince a profession of small business owners to give up their independence and become employees? And how do you get them to stay long-term? Because it's not going to be as fun not getting to run the show, right? So this group is enormously helped by student loan burdens, because if you have a really high student loan burden, it's going to make you risk-averse. If you have $50,000 of student loan debt, you wouldn't be afraid of taking on a practice loan, because it's just the one thing you have to think about. But if you have $500,000 of student loan debt, you see what that standard 10-year payment is looking back at you, maybe you don't understand IDR that well, and you're like, oh my gosh, I need to go get a job, I need a guaranteed salary, or else I'm screwed. That's a burden, because you feel like you have to get something safe and secure so you'll have enough money to put food on the table and still pay your loans. So these big groups, they didn't design the system this way, obviously, but these big corporate employers, they love people having big student loan debt. And what about big hospital systems for physicians? Gosh, this really gets me going, because full disclosure, I really dislike these systems. I think the idea of having not-for-profit hospital systems is just one of the biggest policy failures in America from a tax perspective. I think it's just a big bunch of for-profit groups that don't really even act like a for-profit. They have all the worst aspects of a for-profit business without any of the positives of a not-for-profit business, I feel like. Please don't hold this against my wife, she's a physician at a big research hospital, so this is my opinion, not hers. But big hospitals make you feel like you should bow and thank them for deigning to give you a job. I mean, the pay is often really low compared to other options, and a lot of times they put pressure on you as a physician to act like a private practice anyway. I can't tell you how many times I've heard physicians take jobs at these top university hospitals, and the administrators are like, why aren't you operating more? And the physicians will be like, oh, well, maybe I wanted to try to practice evidence-based medicine? And the administrators or the people who make the business decisions at the hospital are like, oh, that's funny. Did you see the big buildings we built? Because those don't pay for themselves. So it's really frustrating, right? And so instead of encouraging more healthcare innovation and more small mom-and-pop doctor's offices and encouraging people to set up private practices in underserved communities, we've set up systems that make it more challenging for folks to be their own bosses. So for example, at PSLF, if you're a family medicine doctor and you want to work at the outskirts of a Native American reservation, you might have maybe a little bit of student loan programs you can apply to. Maybe your state has a program, maybe you can look into the Indian Health Service to see if they have a program. But you don't qualify for public service loan forgiveness if you set up a private practice clinic, which is something that you could maybe do as a small family med doc. But if you were an orthopedic surgeon that happens to be working at a New York hospital that's extremely wealthy hospital, right, like one with a multi-billion dollar hospital endowment, and you're making three times as much money as the family medicine doctor, because you work in a not-for-profit hospital, you get public service loan forgiveness at a place where there's plenty of orthopedic surgeons in New York City, whereas the person that's working in the outskirts of the Native American reservation as a private practice family medicine doc does not get it. And if you think about this, big hospitals and systems have great lobbyists. I think that they made sure that they qualified for PSLF. Now, was there some misses? Was there some Kaiser Permanente groups that got left out that really want to get included? You know, now that they realize how good the system is and how easy it is to retain talent with it, yeah, they will want to amend it. But the complexity of the student loan system is fantastic for these big healthcare groups, because now they can just point to what you get for PSLF and say, well, we don't really need to pay as much, right, because, you know, you have PSLF to benefit from, so why would you need to complain about being underpaid compared to private practice people? So what about future legislation that might benefit employers and help them profit off the student loan system? So employers can now give you $5,250 tax-free on your loans every year, and they're probably going to get a 401k style matching plan as well that they're going to get to use. So that's going to, that sounds really exciting, right? I mean, you're going to see a huge number of employer student loan repayment assistance programs pop up in the next several years. Probably, I would predict the vast majority of the Fortune 500 or something is going to have a student loan repayment benefit where that's way up from, like, you know, a small proportion of them now, because this is a great way to give your employees tax-free money to them, and they're going to love it, and it's going to hold them down in their jobs for a lot longer, and they're going to not want to leave as much and ask for raises and get career opportunities as fast. That's not a good thing. That's good for the big employers, but it's not good for our economy because it makes people less likely to go out and set up their own small business, which is, we know small business is the primary engine of job creation, too. So this is something that benefits your big, large employers. It's not something that helps small businesses. Just look at an example of comparing the corporate dental groups to the small dental practices. For this new student loan tax deduction, you can easily set this up if you're a big DSO group, because you can go set it up for all your employee dentists and all of your employees across the whole business. If you're a person that owns your own practice, you can't benefit more than 5% of the money you put towards this assistance program. You might only have, like, 10 or 20 employees, and not all of them will have student loans, so you basically can't even use this. Isn't that frustrating that you can't even benefit from this program when your competitors, which have hundreds of practices, do get this benefit? So that's something, another example why your big employers are one of the primary beneficiaries of the student loan system. So we've got universities, we've got big employers, and then number three is banks and student loan servicers. Tell me a world where FedLoan servicing would be rehired for absolutely anything in any other industry. The answer is they would not be. They would definitely not be rehired for anything, but they're a quasi-governmental body. They're owned by the Pennsylvania Higher Education Authority. They have all these PSLF records on file, so it's tough to fire them, because holy cow, can you imagine how bad their records would be if they're transferred to a new firm when they're so bad as is? The other big servicers deserve a lot of bad press, too, because they do a fairly poor job overall, but again, the system is complex and they have to bid for a low-bid contract, because that's what the government asks them to do, and naturally, if you're awarding a contract for the lowest cost, if someone bids, they're going to give you bad service. So I do say that, yeah, it's their fault, but it's the system's fault, too. Now, banks that offer private loans obviously profit off the system. They enjoy not having to allow bankruptcy discharge, which is life-wrecking in some cases. You know, private student loan refinancing companies, many of which kind of sponsor student loan planner, they did not offer interest suspension when the government did, and a lot of people wouldn't have signed up for refinancing if the federal system was not as complex, and would not have signed up for refinancing if they had known the interest was going to be suspended during the coronavirus pandemic, right? And obviously, we wouldn't have told people to refinance in the early part of 2020 if we had known that was coming, but we didn't know that, and so to be real honest with you, real transparent, student loan planner benefits from complexity, too. We have conflicts of interest. If they made student loans 5% of income with 3% interest rates with no tax bomb, no one would refinance, no one would need student loan consulting, and I guess this podcast would become an amusing historical blot in history. Maybe we can submit one of the episodes for, you know, the Smithsonian probably would say, haha, that's funny. We don't need to record any of that. Let's just forget that ever happened. Such a traumatic period of history of student loans being stupid, right? But we exist. Student loan planner does exist because the system is a wreck, and it is bad, and it is complicated, and a lot of people profit off of you from having to stumble through a bad system that's designed almost intentionally to be confusing, right? You feel like it is at some time, a lot of points. So when you refinance your loans when you should and hire us for a consult when your loans are causing you anxiety, we can save you a lot of money, and yes, we, you know, we do profit because otherwise if we didn't have a profit, we would not be in the business, right? And so what we try to do is we take our profits and we negotiate ever better bonuses for refinancing. So like we're the only company out there that's offering multiple thousand plus dollar bonuses now for refinancing student loans. That's because over time we're able to reinvest, reinvest, reinvest, and then go to all these banks and say we want to get even better deals for our readers that are going to allow people to pay off their loans even sooner, refinance multiple times with a refinancing ladder strategy where you start off with a 20 year, get a bonus, refinance to a 10 year, get a bonus, refinance to a five year variable, get a bonus. We do that because it obviously helps you get out of debt sooner and it's profitable for us. But instead of other places that try to keep the whole commission for themselves, we try to make sure that we're giving you the best deal possible. And we're trying to always put the consumer first. So like when there's changes to the student loan system, like we're expecting president elect Biden to maybe, and I guess by this time, this podcast comes out president Biden or the day after president Biden. So we expect that he's going to push for things like simplifying income driven repayment, eliminating the tax bomb, doing things for student loans that'll make it more beneficial to have your loans be federal than private. So it goes against our interest to say this financially, but we think that if you have a debt to income ratio of 1.5 to one, we generally say, if it's better than that, refinance if you're in the private sector. Now we're trying to make that a little more conservative given these potential expected changes that we're saying will now refinance federal loans when the interest is being charged. If you're thinking your debt to income ratio is going to be better than 1.25 to one. Our goal is to try to navigate the system with you and try to give you just the best advice that we can give. If we were going to give our brother or sister-in-law or, you know, somebody that we cared about that we're trying to help out, what would we tell them? Honest and goodness, no conflicts of interest. What's the best advice, right? It's one reason why I'm a lot more conservative about telling people to pay off their debt than other places. Other places profit a ton off of getting you angry about the student loan system to then sell you something about how to pay it off, right? Or then to make you refinanced because that's how they make the most money on commissions or whatever, right? So what we try, have always tried to do is to say, well, how do we put the listener, how do we put the reader, the client first? And then the profits that we do get, we try to reinvest the majority of those profits into creating ever better blog posts, better podcast episodes, better tools like free calculators that you can now find on our website. And that allows us to reach even more people and help even more lives and that's the whole point. So don't let the complexity of student loans frustrate you and discourage you. Student loans are complex and yes, a lot of people profit off of that and that stinks. It shouldn't be that way. And now that we're done getting frustrated about it, let's ask how can we make your life better and how can we make your life less stressful because the system is complex. So a lot of you have gotten student loan plans from us. If you haven't, you can get one at studentloanplanner.com slash help. A lot of you have refinanced your loans through us. If you don't refinance your private loans soon, I think you could really miss out on the all-time low for student loan refinancing. So please check out studentloanplanner.com slash refi if you have not applied to refinance your private loans in the past two or three months. And we're going to see, I think pretty soon what's going to happen in the first hundred days of the Biden administration on student loans shortly. So we'll see what happens. Maybe by the time this podcast comes out, we'll have a lot more detail, like they'll announce something same day or something like that, but we'll look out for that and we'll let you know what that means for your life so that you don't have to be scared about student loan complexity. Anyways, don't get discouraged. Get angry about the stupid student loan system that we have, but don't get angry too long because you want to take that attention and focus it on so many other things in your life that we can be grateful for, that we can be happy for, and how you can grow your net worth and invest and have the family you wanted to have or buy the house you wanted to or take that vacation that you're looking forward to. You know, you can do all these things regardless of your student loan burden, and that's a blessing. So don't let student loans hold you back. Don't let the complexity frustrate you. Don't let the fact that a lot of people are profiting off of the corrupt system bother you more than it has to, so you can just focus on the future. Thanks for listening to today's episode. If you have questions or comments or anything you want to have me react to on the podcast, I'd love to get that. Check out studentloanplanner.com slash voicemail and just like record a quick 30-second thing, and then we'll have some more listener questions or comments on the show. It always makes it a lot more fun and engaging to talk about that. So we've got a special guest for you for the podcast next week, but for now, have a wonderful rest of your week and thank you for listening to the Student Loan Planner Podcast.