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  • Anglia Advisors Improves Holistic Offering with Student Debt Repayment (Case Study)

    Anglia Advisors Improves Holistic Offering with Student Debt Repayment (Case Study)

    Anglia Advisors offers comprehensive financial planning services to their clients. Over the past few years, they’ve seen an increasing number of prospective and existing clients with significant student debt. The burden is extremely high for anyone with a graduate degree, especially legal and medical professionals.

    When Anglia Advisors began to research programs available to student loan borrowers, they found a minefield of regulatory nuances. Repayment options felt impossible to forecast with any accuracy. Most available resources were in the form of scattered spreadsheets and online calculators.

    They needed an accurate, simple resource — and fast.

    Using Payitoff, Anglia Advisors saw a dramatic increase in efficiency delivering financial plans for clients with student loans. Some client cases used to take hours — now they could get answers in minutes.

    In this case study, you’ll learn how Anglia Advisors used Payitoff to:

    • Put their clients on a faster path to asset generation
    • Leverage opportunities with Public Service Loan Forgiveness and additional federal programs
    • Attract new clients to their service
    • Find incredible saving opportunities, including a single client saving $599,192 based on findings within the platform

    Download the Case Study Here

  • Saving $32k with Teacher Loan Forgiveness

    Saving $32k with Teacher Loan Forgiveness

    It’s hard to keep track of all the alternative forgiveness options available to student loan borrowers. Many exist based on occupation, state and type of loan. The nuances of each program are confusing, especially when it comes to federal teacher loan forgiveness.

    TLDR: You can now check eligibility for Teacher Loan Forgiveness and see an estimate of savings on Payitoff.

    Eligibility

    To qualify, you need to:

    • have Direct or FFEL student loans
    • be a “highly qualified teacher” in a school or agency categorized as low-income or Title I
    • teach for five consecutive years

    Up to $17,500 will be forgiven after five years depending on the subject taught and the type of schooling (secondary vs. elementary).

    Gotchyas

    If a borrower elects to do both PSLF and Teacher forgiveness, it will take 15 years to complete the program from start to finish.

    When is this program useful?

    Teacher Loan Forgiveness is a game changer in a number of cases:

    1. Teachers who don’t want to teach for more than five years in a PSLF-eligible employer
    2. Teachers who have a small amount of loans (less than $17k)
    3. Teachers in the Standard, Extended or Graduated plans
    4. Teachers whose Adjusted Gross Income is higher than their debt burden.

    As an example, let’s take a look at Clint — a science teacher working in a low-income middle school in Arizona. He makes $75k / year, has $40k in Direct loans and started teaching in late 2016.

    He’s on the Extended Repayment Plan, which will take 25 years to pay off and cost him $79,283.63 in the process.

    With Teacher Loan Forgiveness, Clint will have $17,500 of his loans forgiven June, 2021, saving him $32,410.60 compared to his original payment plan. That is a massive difference!

    Running Clint’s numbers on Payitoff

    We’ve made it dead simple to determine eligibility and savings for the Teacher Loan Forgiveness program.

    Navigate to “Forgiveness Programs” and enter the teaching history. You can also search for the school to confirm that it’s eligible for the program:

    We’ll determine the teaching requirements for that state, which of their loans are eligible, and how much will be forgiven.

    Direct and FFEL loan types are eligible (unless they are PLUS loans)

    You’ll automatically see the savings once you generate a report:

    Clint saves big!

    Applying for Teacher Loan Forgiveness

    After five consecutive academic years, fill out this form to apply for the Teacher Loan Forgiveness program.

    Make sure you specify which loans you want forgiven, otherwise the servicer will choose for you. On Payitoff, our forecasts apply forgiveness to eligible loans starting with the highest interest rate unless you specify a different order.

    If you are applying for forgiveness of loans that are with different loan servicers, you must submit a separate form to each of them.

    fin

    We hope this feature set helps you save time when determining the tradeoffs of Teacher Loan Forgiveness. If you have questions or product ideas, feel free to shoot us an email! We love love love feedback. 😃

    ···

    Thanks to Nicolle Matson

  • Federal Direct Loan Consolidation

    Federal Direct Loan Consolidation

    The skinny on a “not-so-normal” consolidation option

    The word “consolidation” has a pretty consistent definition in lending: take a set of loans and group them into a single loan, using the weighted average interest rate for the new loan.

    In Student Loan Land, consolidation usually comes to mind when refinancing a bunch of student loans into a single private loan at a lower interest rate. There are huge tradeoffs to refinancing — mainly the loss of deferment protections and income-driven options if the loans are federal.

    As it turns out, there’s a way to consolidate the loans with the government and do the opposite — open up further repayment options!

    Direct Consolidation can give the borrower more room to repay!

    The Basics

    Federal Direct Loan Consolidation works the same way as a normal consolidation with a few differences:

    👍 The new loan is a Direct Loan. This qualifies the borrower for new income-driven repayment options such as REPAYE and PAYE.

    👍 Direct Consolidation Loans are eligible for PSLF. You can read more about the benefits of Public Service Loan Forgiveness here.

    ❗️ The repayment schedule is reset. If payments were made on a forgiveness plan with old FFEL loans, those are wiped from the record.

    ❗️Any outstanding interest is capitalized. If interest has been accruing on the consolidated loans, it’s immediately added to the balance.

    Two other interesting things happen:

    ✅ If any of the consolidated loans are Parent or Graduate loans, the new Consolidated loan keeps track of it for estimating repayment terms.

    ✅ If any of the consolidated loans were subsidized, the government will break the Direct Consolidation into two loans: Subsidized and Unsubsidized.

    You can choose the repayment plan for the new loan — 10-Year Standard is the default. The term on the Direct Consolidation Loan could be different depending on the amount of student debt the borrower has.

    When It’s Useful

    There are two common cases where a Direct Consolidation makes sense:

    1. The borrower is going for PSLF and has old FFEL loans from undergraduate years.
    2. The borrower wants to switch to a different income-driven plan.

    We’ve seen borrowers consolidate just a single loan to help achieve one of these outcomes!

    NOTE: #2 should absolutely never happen unless you’ve run the numbers on switching plans (including capitalizing interest).

    For example, if you do a Direct Consolidation of FFEL loans which are midway through IBR 2009, you’ll be resetting the forgiveness clock on those loans. Instead of seeing forgiveness in 12 years, you’ll have to wait 20 years on PAYE.

    This action can dramatically increase the total paid on the debt over time. Please proceed with caution!

    Don’t do Direct Consolidation without running the numbers!

    Simulating Direct Consolidation

    At Payitoff, we recently found a way for you to run these numbers. If we detect an older loan that could benefit from Direct Consolidation, we’ll flag it in the opportunities section of the Overview:

    Once you click on “Consolidate FFEL loans into Direct Loans”, you’ll see all the loans that are eligible:

    After clicking “Consolidate”, these loans will enter the Standard 10-Year plan and simulate all the actions described above, including interest capitalization, the subsidization split, repayment schedule reset and more. You’ll be able to compare all the repayment options with the newly consolidated loan.

    At the moment, we don’t have “undo” functionality for simulations. We recommend running a report without Direct Consolidation first then comparing that to the simulated version!

    The Process

    Once you’ve found whether it makes sense for the borrower to apply for a Federal Direct Consolidation Loan, there are a few steps:

    1. Fill out the Federal Direct Consolidation Loan Application Form. Be very clear when filing out “Loans to Consolidate” and “Loans to not Consolidate” sections of the form.
    2. Request a repayment plan to accompany the Direct Consolidation application. For income-driven options, the borrower needs to fill out an IDR Plan Request instead.

    This can all happen online as well.

    We hope this was a helpful primer to Federal Direct Loan Consolidation. If you have questions, feel free to shoot us an email! We’re here to help 😃

  • Entering Student Loan Repayment

    Entering Student Loan Repayment

    What Actually Happens?

    If you have a client who is currently in school or deferring loans, it is often difficult to determine what repayment will look like for them. Lots of questions come up…

    • What will their monthly payment be?
    • What kinds of options will be available to them?

    From The Top

    Let’s take a quick look at the process of entering repayment.

    Once a student takes out a loan for their education, interest begins accruing immediately (unless the loan is subsidized*). Luckily, the interest is not added to the balance — it just gets tallied every month the loans are “in deferment”.

    There are several types of deferment. The most common are In School or In Grace Period. The grace period is a six month period post-graduation or withdrawal where the borrower is not obligated to make payments.

    There are two important things that happen by default when loans are transitioned from “Deferred” to “In Repayment”:

    • Interest capitalizes: Any outstanding interest is applied to the balance
    • Monthly payment is set: The loans enter a 10-Year Standard Repayment Plan, where the monthly payment is determined by the new balance.

    These are the default actions. It’s up to the borrower to tell their servicer which repayment plan they’d like to be on — that’s where Payitoff can be helpful.

    Simulating Repayment

    Once you sync your client’s loans or upload the MyStudentData file, our system will detect whether the loans are currently in deferment.

    You’ll see an opportunity in the Client Overview

    From there, we’ll tell you which loans are going to enter repayment

    Once you click “Enter Repayment”, each loan listed will be put on the Standard Repayment plan with an updated payment:

    Example loan name, interest rate, new balance and new monthly payment

    This simulates the process as if the client were to enter repayment today!

    From here, you can compare any of the federal programs available against the default repayment schedule, including income-driven options.

    More Simulations

    We plan to build more simulations for other common situations:

    We‘re also going to introduce “Undo” functionality in case you want to revert to the prior scenario.

    If you have questions, feel free to shoot us an email!

    ···

    *Subsidized loans are available to students with financial need. Interest will not accrue during deferment periods. Learn more about subsidized loans here.

  • PSLF In A Nutshell

    PSLF In A Nutshell

    The Public Service Loan Forgiveness program is a federal program where a student loan borrower gets tax-free loan forgiveness if they:

    • have Direct Loans
    • work full-time at a qualifying employer* for 120 months in repayment
    • are on an income-driven repayment plan**

    Let me be clear: PSLF is NOT a repayment plan!

    It’s a special program layered on top of an already-complicated repayment process for student loans. After 120 cumulative payments any outstanding interest is capitalized, attached to the outstanding debt and forgiven tax-free.

    This can result in huge savings for heavily burdened clients, especially new doctors, dentists or lawyers.

    As mentioned, the 120 payments don’t need to be consecutive at all! They can spend a year at a private sector job, then return to public service and finish the PSLF program.

    When to PSLF

    Public Service Loan Forgiveness comes up a lot for financial advisors using Payitoff. Often, their clients are deciding whether it makes sense financially to work in the public sector for 10 years or pursue alternative career options.

    This is an incredibly important life decision.

    You’ll want to consider PSLF for the following cases:

    • Your client is considering a job in the public sector with a slight pay cut
    • Your client is already in public service and is in repayment

    How to PSLF

    If you’re planning to have your client pursue PSLF, there’s two ways to ensure a positive outcome.

    1. Every year, they need to fill out the Income-Driven Repayment Plan Request Form a month before the due date to re-certify their income. If they miss the deadline — one year from submission date — their interest will capitalize!

    2. They should submit the Public Service Employment Certification Form. This isn’t required, but is extremely useful in confirming all their payments qualify each year.

    #2 should also happen any time they switch employers.

    Once they’ve hit the 120 payment mark, there’s a third form which actually asks the government to forgive the burden.

    If you’re unsure whether your client’s employer is a qualified 501(c)(3), you can search directly within Payitoff. Check it out:

    Ain’t Got Direct Loans

    Unfortunately, only payments made on Direct loans will count towards that 120 total. There’s another group of loans called Federal Family Education Loans (FFEL) which were very common pre-2010. If your client has FFEL loans, they can still qualify for Public Service Loan Forgiveness by doing a Direct Consolidation.

    Warning!! If your client is partially through income-driven repayment with their FFEL loans, a Direct Consolidation will reset the forgiveness clock.

    For example, if they are halfway through the Income-Based Repayment Plan (yes, this is different than IDR) and they consolidate, they will start from zero for their forgiveness term. Any payments made prior to the consolidation will no longer count.

    The Future of PSLF

    PSLF doesn’t appear to be going anywhere. All of the bills currently circulating Congress support grandfathered PSLF candidates. If your client is on track for PSLF, the government can’t legally pull the rug out from under them. PSLF is literally on the Master Promissory Note.

    That said, in my view PSLF is not exactly a sustainable program — don’t expect it to last forever.

    I hope this has been helpful! In a future post, I’ll be discussing the recent data around PSLF and dive into the lesser known Temporary Extended Public Service Loan Forgiveness Program.

    *A qualifying employer is considered to be:

    • Any federal, state, local, or tribal government organization
    • A 501(c)(3) non-profit organization
    • Peace Corps or AmeriCorps
    • A not-for-profit that’s not 501(c)3 designated, but meets other requirements related to public service, federal, state, local, or tribal government organizations

    **All income-driven plans qualify, as well as the 10-year Standard Repayment Plan. However, it makes zero sense to be on Standard Repayment since the loans will be paid off by the time they’d be forgiven.

  • Predicting the Future

    Predicting the Future

    Few things are more stressful than the uncertainty of income-driven repayment plans for student loans.

    Imagine how your client feels when their financial health is tied to the government — every income change and new family addition affects their financial outcome. It’s hard to make informed decisions in this environment!

    We want to help with that. Today we’re launching Payitoff Scenarios, a way to see how future life events affect your client’s income-driven repayment.

    Let’s break down how it works.

    Major Life Changes

    Right now, we support two significant life scenarios:

    1. New Income
    2. New Family Member

    When you are exploring an IDR timeline, you have the option to add any of these scenarios. Let’s look at an example.

    Doctor, Doctor!

    Say your client is a soon-to-be doctor making $30k / year in residency. They’ve recently entered repayment and are expecting an income jump of $300k in 3 years. They’re on the Revised Pay As You Earn plan (REPAYE) and qualify for Public Service Loan Forgiveness.

    Without the income jump, REPAYE looks like a good deal since the subsidies control the interest and the forgiven balance is far lower:

    Income-Driven options for our doctor

    But once we add the future scenario, it becomes clear that REPAYE will ruin your client’s cash flow down the line:

    Their monthly payment jumped from $106.02 to $2,587.18.

    That’s insane! Since they’ve recently entered repayment, it might be a wise choice to move your client in a scenario with a monthly payment cap. How about when they enter PAYE?

    Much better. This time, the monthly payment only jumped from $106.02 to $1,478.28. Now we have predictable cash flow and a lower total cost. In this case, PAYE is a clear winner.

    We’re planning to introduce more life events down the line, but these two are definitely the ones that most significantly affect income-driven outcomes.

    Give it a spin — we’d love to know what you think!

  • Announcing NSLDS Support!

    Announcing NSLDS Support!

    The National Student Loan Data System (NSLDS) is the central database for any federal aid provided in the United States. As part of the system, they allow any borrower to have access to a snapshot of all their federal loans or grants used to pay for education.

    The snapshot is called a “MyStudentData” text file. It can be very handy when needing to drill into the details of a loan’s history – from origination to the current status!

    We’ve already been able to help advisors gain access to this information through Payitoff Sync.

    However, we’ve noticed that some advisors prefer not to send a link to their clients or aggregate accounts if they already have a MyStudentData file. Also, it is largely seen as a reliable “source of truth” when verifying federal repayment options (especially among student loan experts).

    Uploading a MyStudentData File

    On Payitoff, advisors can now upload this MyStudentData file and gain access to the entire snapshot within seconds. Here’s a peek of how it works:

    How to upload a MyStudentData file

    How Do I Find This File?

    You’ll need to ask your clients to follow the steps below in order to get the file:

    1. Go to this NSLDS site and log in with an FSA ID. If you don’t have an FSA ID, you can create one by clicking on “Create an FSA ID”.
    2. Press “Accept” on the next prompt.
    3. Click on the MyStudentData Download icon.
    4. Read the confirmation message and press “Confirm”.

    Here’s a pdf handout of these instructions that you can send to a client. Instead, you could also share this video explaining how to get the file.

    More To Come

    We’re constantly working to improve the planning process for financial advisors whose clients have student loans. We’d love to hear your thoughts on these new additions — and we have many more in store for the future!

  • Advising On Income-Driven Repayment

    Advising On Income-Driven Repayment

    Federal student loan repayment is complicated. There are tons of income-based repayment options and it’s difficult for any financial advisor to navigate.

    • Is my client eligible for any federal programs?
    • Which loans qualify for these programs?
    • What are the tradeoffs of Income-Based Repayment vs Pay-As-You-Earn?

    As a financial advisor, every detail of income-driven repayment is important because they each have a profound impact on your client’s financial outcome.

    Quick example: choosing Revised Pay-As-You-Earn (REPAYE) over Pay-As-You-Earn (PAYE) may be a great idea due to the generous interest subsidization, but what if your client needs the limit on interest capitalization and monthly payment for cash flow reasons?

    These are difficult decisions to make. Too often, financial advisors have to trudge through the mud to get answers. Not anymore!

    Income-Driven Comparison

    Payitoff was built to minimize complexity and answer the tough questions around student loans, so naturally we were inclined to make Income-Driven Repayment (IDR) as transparent as possible.

    Once you’ve added a little information about your client, our system automatically checks whether the loans and client profile match IDR programs. You’ll see a new suggestion when building out a plan:

    When generating a new report, you’ll see a matrix that looks like this:

    Example Client with $132k in Direct Loans

    We factor in the exact details of each program, including any subsidization behavior and interest capitalization nuances.

    In our example above, you’ll see that the client spends the same over the life of REPAYE and PAYE, but ends up with a slightly worse tax bomb at the end of the term due to differences in government subsidies.

    In the Income-Based Repayment case, the total paid is much larger because they are on the older IBR plan, which utilizes 15% more of their discretionary income (vs 10%) with a 5 year longer term. In this scenario, the client would be paying more but be debt free three years sooner.

    PSLF

    Public Service Loan Forgiveness is a big question mark for many financial advisors. If you’re considering IDR for your clients, it’s important to run a PSLF scenario so your client can view the trade offs of working at a for-profit vs non-profit organization.

    Eligibility

    First off, it can be difficult to tell whether your client qualifies for PSLF or if they ever worked in a place that did.

    Within Payitoff, you can now search to see if your client’s employer qualifies as a 501(c)(3), which are eligible organizations for the plan:

    PSLF Employer Search

    Execution

    When you get into PSLF, it’s crucial that your client stays true to it. You’ll want to have annual check-ins to ask how repayment is going and if it matches the plan. Under PSLF, your client needs 120 qualifying payments to elect tax-exempt forgiveness.

    You can export the PSLF report for future reference when discussing progress with accumulating these 120 payments.

    Public Service Loan Forgiveness may seem like a large unknown for many advisors, but it absolutely has huge benefits. If your client is a doctor in residency working in a non-profit hospital, this choice can be a big factor on their financial well being.

    What’s next?

    Right now, the software makes a fair amount of assumptions about income growth and family size. We want to introduce the following to our IDR tool:

    • Income Prediction: plan multiple income scenarios and family sizes so your client can see how life changes affect their repayment and goals.
    • IDR Timeline: similar to our prepayment forecast, we want every IDR plan to have an associated timeline so the client can see exactly how their payments progress over time.

    If you’re in our beta, you have access to this right now. If not, we’ve opened up a few spots so you can try it out and let us know what you think. We’d love to hear your thoughts!

    ···

    Thanks to Nicolle Matson

  • Announcing Payitoff Sync!

    Announcing Payitoff Sync!

    As a financial advisor or coach, it can be tough to track down loans and credit cards for a client when developing a debt reduction plan.

    This process currently involves interpreting an assortment of bank statements, building out a templated Excel spreadsheet, and sometimes managing phone calls with loan servicers. It’s is a major time sink!

    We’re not big fans of wasting advisor’s time, so we’re excited to announce a new feature: Payitoff Sync!

    How It Works

    Advisors on Payitoff can have their clients sync their debt in minutes instead of needing to collect it manually. Check it out:

    Minutes (Not Hours)

    The basic flow looks like this:

    1. Advisors generate a secure, one-time-use link that expires in 3 days.
    2. Advisors share the link directly with the client.
    3. The client uses the link to connect with their debt accounts directly.

    That’s it!

    Every single student loan servicer, bank or credit institution is covered (including the National Student Loan Data System).

    We’ve partnered with Quovo to manage the connection with the banks, so we’re not storing any sensitive client information — authentication is handled directly with the institution. Nice!

    When Can I Use It?

    Right now! If you’re a part of the beta program, you already have access to this feature from the client loan dashboard.

    If you haven’t signed up yet, there’s still a few spots available in the program. We’d love to know what you think!

  • Measuring Gains Post-Student Loans

    Measuring Gains Post-Student Loans

    Prepaying on student loans is tough. The loan terms are often so long that even putting an extra $100 in every month doesn’t feel rewarding. It takes years and years to see the benefits. It’s not easy to stay motivated that long!

    Adding Fuel to the Fire

    Instead of just thinking about the time you are debt-free, let’s look at the possible gains once you are.

    Say you’re paying $565 / month on your student loans and you add $100 every month to your highest interest loan (typically called the Avalanche method). Depending on the loans, you could be debt-free 2 years, 3 months faster with that prepayment — what could you do during those years?

    You could take that $665 / month and put it in an investment account to earn interest. Just after the 2 year mark, you’d save:

    • $18,649.12 at 1% interest
    • $19,501.37 at 4% interest
    • $20,182.64 at 7% interest
    Actual calculation based on the average student loan burden

    Serious Results

    Holy smokes, $20,182.64!! You could put that towards a down payment on a house or keep it for retirement. By prepaying, you’re actually giving yourself the time to earn more cash. And that’s freaking powerful.

    Imagine two universes:

    1. You keep doing what you’re doing. You’re debt free in 8 years
    2. You add $100 extra / month. You’re debt free and have $20k in 8 years

    Which do you prefer?