WEBVTT 00:00:00.000 --> 00:00:02.259 Welcome back to the Deep Dive. So if you are 00:00:02.259 --> 00:00:04.719 one of the millions of Americans with federal 00:00:04.719 --> 00:00:08.039 student debt, you probably know the feeling. 00:00:08.140 --> 00:00:09.779 Oh, yeah. That feeling that the repayment system 00:00:09.779 --> 00:00:12.199 is less of an organized plan and more like a 00:00:12.199 --> 00:00:15.560 bureaucratic maze made of jargon. A maze is a 00:00:15.560 --> 00:00:18.960 good word for it. Yeah. Today, we are grabbing 00:00:18.960 --> 00:00:20.980 the machete. We're cutting right through all 00:00:20.980 --> 00:00:23.539 of that complexity. We're doing a deep dive into 00:00:23.539 --> 00:00:26.100 the single most important tool for managing that 00:00:26.100 --> 00:00:30.339 debt, income -driven repayment or IDR. It is 00:00:30.339 --> 00:00:33.840 truly a legislative thicket. And honestly, understanding 00:00:33.840 --> 00:00:37.479 it is just it's non -negotiable for borrowers 00:00:37.479 --> 00:00:40.320 today. We're talking about the big umbrella term 00:00:40.320 --> 00:00:44.079 that covers programs like IBR, PYE, ICR, and 00:00:44.079 --> 00:00:46.500 of course, the big new one. The one that's been 00:00:46.500 --> 00:00:49.100 in the news so much. Exactly. And all these plans 00:00:49.100 --> 00:00:51.820 are designed to do one thing. Adjust your monthly 00:00:51.820 --> 00:00:54.399 payments based on your actual financial reality, 00:00:54.579 --> 00:00:57.159 your income, your family size, instead of just 00:00:57.159 --> 00:01:00.380 treating your debt as this fixed, immovable number. 00:01:00.810 --> 00:01:03.509 And that difference is just so critical. So our 00:01:03.509 --> 00:01:05.189 mission here is pretty clear. We've gone through 00:01:05.189 --> 00:01:07.549 a mountain of source material. We've analyzed 00:01:07.549 --> 00:01:10.390 the specific rules, the political history, and 00:01:10.390 --> 00:01:14.510 maybe most importantly, the extreme administrative 00:01:14.510 --> 00:01:16.670 volatility and all the legal challenges that 00:01:16.670 --> 00:01:19.090 have really defined IDR, especially in the last 00:01:19.090 --> 00:01:22.569 year or so through 2024 and 2025. Yeah. Our sources 00:01:22.569 --> 00:01:25.109 give us a really detailed blueprint of how these 00:01:25.109 --> 00:01:27.450 plans are supposed to work. Supposed to, yeah. 00:01:27.489 --> 00:01:30.719 But they also chronicle the, I mean... The absolute 00:01:30.719 --> 00:01:34.319 turmoil, the legal blockades, the application 00:01:34.319 --> 00:01:37.280 freezes, the policy whiplash. It's been a mess. 00:01:37.560 --> 00:01:39.739 So we're here to synthesize all of that. We want 00:01:39.739 --> 00:01:42.180 you, the listener, to walk away from this really 00:01:42.180 --> 00:01:45.159 understanding the core financial mechanics, but 00:01:45.159 --> 00:01:47.859 also the political pressures that are reshaping 00:01:47.859 --> 00:01:50.579 this entire system in real time. Let's do it. 00:01:50.700 --> 00:01:52.739 Okay, so let's start at the foundation. Because 00:01:52.739 --> 00:01:55.319 to get IDR, you have to understand one calculation 00:01:55.319 --> 00:01:58.000 above all else. And that's the definition of 00:01:58.000 --> 00:02:00.370 discretionary income. This formula is basically 00:02:00.370 --> 00:02:02.890 the engine for the whole system, right? It determines 00:02:02.890 --> 00:02:04.769 the pool of money the government looks at to 00:02:04.769 --> 00:02:08.789 figure out your payment. So what is it? Right. 00:02:08.870 --> 00:02:12.789 So discretionary income in the world of IDR is 00:02:12.789 --> 00:02:15.310 basically the amount of money you earn that the 00:02:15.310 --> 00:02:17.830 government says is available for non -essential 00:02:17.830 --> 00:02:21.050 things after they account for your basic needs. 00:02:21.330 --> 00:02:23.689 Okay. And that calculation starts with your adjusted 00:02:23.689 --> 00:02:27.039 gross income, your AGI. Yes. And we should probably 00:02:27.039 --> 00:02:29.139 pause on that for a second because AGI is a term 00:02:29.139 --> 00:02:31.419 we throw around all the time. But not everyone 00:02:31.419 --> 00:02:34.120 lives and breathes their tax forms. Exactly. 00:02:34.139 --> 00:02:37.719 So your AGI is your total income minus certain 00:02:37.719 --> 00:02:40.240 specific deductions. Things like contributions 00:02:40.240 --> 00:02:43.939 you make to a 401k or. Or even some of the student 00:02:43.939 --> 00:02:45.939 loan interest you pay. So it's the number the 00:02:45.939 --> 00:02:48.400 IRS uses after those first few things are taken 00:02:48.400 --> 00:02:50.620 off the top. Precisely. It represents your core 00:02:50.620 --> 00:02:52.620 taxable income, which is why it's the standard 00:02:52.620 --> 00:02:55.500 verifiable number they use for all these IDR 00:02:55.500 --> 00:02:58.180 calculations. Okay, so we take the AGI. Then 00:02:58.180 --> 00:03:00.659 what? Then you subtract a protected amount of 00:03:00.659 --> 00:03:03.960 money, a floor. And that floor is based on the 00:03:03.960 --> 00:03:06.500 federal poverty level for your family size. The 00:03:06.500 --> 00:03:08.479 money you earn above that floor is what they 00:03:08.479 --> 00:03:11.229 consider discretionary. And right there, that's 00:03:11.229 --> 00:03:13.270 where the policy choices really hit the wallet, 00:03:13.370 --> 00:03:16.229 isn't it? That is the entire ballgame. Because 00:03:16.229 --> 00:03:19.650 historically, for the older plans like IBR and 00:03:19.650 --> 00:03:23.349 PAYE, that protected income floor, the amount 00:03:23.349 --> 00:03:25.669 you got to keep, no questions asked, was set 00:03:25.669 --> 00:03:28.169 at 150 percent of the federal poverty level. 00:03:28.310 --> 00:03:30.509 150 percent. So that gave you a bit of a buffer, 00:03:30.590 --> 00:03:34.509 a baseline safety net. It did. But the new SVE 00:03:34.509 --> 00:03:38.180 plan. This is where things really changed. It 00:03:38.180 --> 00:03:40.400 completely rewrote that part of the equation. 00:03:40.620 --> 00:03:42.159 And this is where the savings really start to 00:03:42.159 --> 00:03:44.039 show up for people. It is the single biggest 00:03:44.039 --> 00:03:47.139 game changer. Under SaveE, discretionary income 00:03:47.139 --> 00:03:50.180 is now defined as income above a much, much higher 00:03:50.180 --> 00:03:53.659 floor, 225 % of the federal poverty level. Okay, 00:03:53.740 --> 00:03:55.139 so let's put some real numbers on that. That's 00:03:55.139 --> 00:03:58.120 a 75 percentage point jump. Why does raising 00:03:58.120 --> 00:04:01.139 that floor matter so much? Well, because it drastically 00:04:01.139 --> 00:04:03.199 shrinks the amount of your income that's considered 00:04:03.199 --> 00:04:04.979 discretionary. You're protecting more of your 00:04:04.979 --> 00:04:06.740 money from the calculation. Exactly. So let's 00:04:06.740 --> 00:04:08.960 use an example. In 2024, the federal poverty 00:04:08.960 --> 00:04:11.319 guideline for a single person was around $15 00:04:11.319 --> 00:04:15.020 ,060. Okay. So under that old 150 % rule, you 00:04:15.020 --> 00:04:16.779 would get to protect. Yeah. What is that? About 00:04:16.779 --> 00:04:20.839 $22 ,590 of your income. Right. And anything 00:04:20.839 --> 00:04:23.620 you earned above that number was fair game. It 00:04:23.620 --> 00:04:25.240 went into the pot that they'd take a percentage 00:04:25.240 --> 00:04:27.680 of for your payment. Got it. But under the new 00:04:27.680 --> 00:04:31.800 SVE plan, with its 225 % rule, that same single 00:04:31.800 --> 00:04:36.120 person now protects about $33 ,885 of their income. 00:04:36.300 --> 00:04:39.079 Wow. That's over $11 ,000 more of your income. 00:04:39.139 --> 00:04:42.319 That is just... shielded. It's invisible to the 00:04:42.319 --> 00:04:44.220 payment calculation. And if your payment is just 00:04:44.220 --> 00:04:46.899 a percentage of that discretionary amount and 00:04:46.899 --> 00:04:49.240 you just shrank that amount by 11 ,000. The payment 00:04:49.240 --> 00:04:51.180 plummets. I mean, for millions of people, it 00:04:51.180 --> 00:04:53.819 goes straight to zero. The shift from 150 percent 00:04:53.819 --> 00:04:57.019 to 225 percent is without a doubt the most powerful 00:04:57.019 --> 00:04:59.839 policy tool they've used to lower monthly payments. 00:05:00.120 --> 00:05:01.740 It's like the government is acknowledging that 00:05:01.740 --> 00:05:05.079 the old poverty metrics were well. Absolutely. 00:05:05.720 --> 00:05:07.920 It's a recognition that the cost of living, especially 00:05:07.920 --> 00:05:09.759 for things like housing, has just completely 00:05:09.759 --> 00:05:12.500 outpaced those old benchmarks. Raising that threshold 00:05:12.500 --> 00:05:14.839 is like giving a massive financial shield to 00:05:14.839 --> 00:05:17.300 low and middle income borrowers. OK, so that's 00:05:17.300 --> 00:05:20.420 the core formula. But beyond that, most IDR plans 00:05:20.420 --> 00:05:22.939 also have some sort of cap, right? People worry 00:05:22.939 --> 00:05:25.279 that if their income goes up, their payment will 00:05:25.279 --> 00:05:27.620 suddenly become unaffordable. Yes. And this is 00:05:27.620 --> 00:05:30.079 a really critical safeguard in the older plans. 00:05:30.339 --> 00:05:34.050 Like IBR and payee? Exactly. A key feature of 00:05:34.050 --> 00:05:37.029 both was a payment ceiling. So yes, your payment 00:05:37.029 --> 00:05:39.810 could go up if your income went up, but it could 00:05:39.810 --> 00:05:42.449 never exceed the amount you would have paid under 00:05:42.449 --> 00:05:44.930 the standard 10 -year repayment plan. So you 00:05:44.930 --> 00:05:48.069 were never punished for enrolling in IDR. Right. 00:05:48.189 --> 00:05:50.990 It was a safety net. If your income really recovered, 00:05:51.129 --> 00:05:52.769 you wouldn't end up paying more than you would 00:05:52.769 --> 00:05:54.870 have if you just stuck with the standard plan 00:05:54.870 --> 00:05:59.170 from day one. That seems... But I feel like I 00:05:59.170 --> 00:06:01.730 remember a plan where that wasn't the case, where 00:06:01.730 --> 00:06:03.610 your payment could actually go higher than the 00:06:03.610 --> 00:06:05.189 standard amount. You're right. And it really 00:06:05.189 --> 00:06:07.569 shows you how the policy goals can shift. The 00:06:07.569 --> 00:06:10.050 now abolished repay plan, which Say replaced, 00:06:10.430 --> 00:06:13.370 was unique. For high income borrowers, payments 00:06:13.370 --> 00:06:15.810 under repay could be higher than the 10 year 00:06:15.810 --> 00:06:18.149 standard amount. So it had no cap. It had no 00:06:18.149 --> 00:06:20.370 cap, which, you know, made it less attractive 00:06:20.370 --> 00:06:22.709 for people like doctors or lawyers who had huge 00:06:22.709 --> 00:06:24.750 debt but also expected their income to grow a 00:06:24.750 --> 00:06:27.509 lot. And that's exactly why when they designed 00:06:27.509 --> 00:06:30.649 SaveE, they made sure to bring that payment ceiling 00:06:30.649 --> 00:06:33.310 back. It's fascinating. The whole policy battle 00:06:33.310 --> 00:06:36.009 really just boils down to two numbers. That poverty 00:06:36.009 --> 00:06:40.110 threshold, 150 versus 225 and whether or not 00:06:40.110 --> 00:06:42.509 there's a cap. That's it. If you understand those 00:06:42.509 --> 00:06:44.709 two mechanics, you can understand the entire 00:06:44.709 --> 00:06:47.509 system. Okay, so with that foundation, I think 00:06:47.509 --> 00:06:49.730 we can finally tackle the alphabet soup itself. 00:06:50.009 --> 00:06:52.930 Let's do it. We've laid the groundwork. Now for 00:06:52.930 --> 00:06:55.050 the real headache. Try to tell the difference 00:06:55.050 --> 00:07:00.100 between the three big legacy plans. I mean, a 00:07:00.100 --> 00:07:02.240 borrower can often qualify for more than one, 00:07:02.399 --> 00:07:04.740 and comparing them is tough. It is. You have 00:07:04.740 --> 00:07:06.620 to look at the payment percentage, the forgiveness 00:07:06.620 --> 00:07:08.740 timeline, and crucially, the eligibility rules, 00:07:08.899 --> 00:07:11.100 which can be really tricky. So where do we start? 00:07:11.360 --> 00:07:13.500 We have to start with the oldest one, the Income 00:07:13.500 --> 00:07:17.220 Contingent Repayment Plan, ICR. The granddaddy 00:07:17.220 --> 00:07:19.540 of them all, yeah? It came out of the Clinton 00:07:19.540 --> 00:07:22.160 administration back in 1994. It was the first 00:07:22.160 --> 00:07:24.319 time the government really established the principle 00:07:24.319 --> 00:07:26.339 that your payment should change with your income. 00:07:26.680 --> 00:07:28.839 So what are the actual mechanics? How is the 00:07:28.839 --> 00:07:31.680 payment calculated under ICR? It's the lesser 00:07:31.680 --> 00:07:34.860 of two different options. The first is 20 % of 00:07:34.860 --> 00:07:37.459 your discretionary income. And remember, ICR 00:07:37.459 --> 00:07:42.139 uses that older, less generous, 150 % poverty 00:07:42.139 --> 00:07:44.899 threshold. 20%. That's the highest percentage 00:07:44.899 --> 00:07:47.740 of any of these plans. It is. The other option 00:07:47.740 --> 00:07:51.139 is a fixed payment based on a 12 -year retainment 00:07:51.139 --> 00:07:53.040 plan, but that's also adjusted for your income. 00:07:53.240 --> 00:07:55.500 But yeah, that 20 % figure is the one that usually 00:07:55.500 --> 00:07:57.459 stands out. So for most people who can qualify 00:07:57.459 --> 00:07:59.600 for something else, ICR is probably the least 00:07:59.600 --> 00:08:01.910 attractive. option financially speaking generally 00:08:01.910 --> 00:08:05.670 yes it's less generous but icr's real value today 00:08:05.670 --> 00:08:08.689 is its accessibility it has the fewest eligibility 00:08:08.689 --> 00:08:11.430 requirements of any idr plan you just need to 00:08:11.430 --> 00:08:13.709 have an eligible loan you don't have to prove 00:08:13.709 --> 00:08:16.290 a financial need or meet some weird borrowing 00:08:16.290 --> 00:08:18.889 timeline this fallback plan it's the necessary 00:08:18.889 --> 00:08:22.579 fallback Especially for borrowers with one specific, 00:08:22.819 --> 00:08:25.420 really tricky type of loan. And that would be 00:08:25.420 --> 00:08:28.740 parent PLUS loans. Exactly. These are the loans 00:08:28.740 --> 00:08:30.620 parents take out for their kids, and they are 00:08:30.620 --> 00:08:33.899 notoriously locked out of most IDR plans. But 00:08:33.899 --> 00:08:37.200 not ICR. This is the vital loophole. Parent PLUS 00:08:37.200 --> 00:08:40.500 loans are generally ineligible for IDR, but UT. 00:08:41.179 --> 00:08:43.860 You can consolidate a parent play us loan into 00:08:43.860 --> 00:08:47.059 a direct consolidation loan. And that new consolidated 00:08:47.059 --> 00:08:49.779 loan is eligible for the ICR plan. So it's the 00:08:49.779 --> 00:08:51.899 only way for those parents to get on any kind 00:08:51.899 --> 00:08:53.940 of income driven path. It's the only way. It 00:08:53.940 --> 00:08:56.000 might not be the best deal, but for those borrowers, 00:08:56.000 --> 00:08:58.440 it's often the only deal on the table. OK, so 00:08:58.440 --> 00:09:01.019 let's move forward in time to IBR, income based 00:09:01.019 --> 00:09:04.389 repayment. This one came out in 2007. The payment 00:09:04.389 --> 00:09:06.750 percentage goes down, but it seems like the complexity 00:09:06.750 --> 00:09:10.330 just goes way up. It skyrockets. IBR introduces 00:09:10.330 --> 00:09:12.730 this really sharp split based on a timeline, 00:09:12.909 --> 00:09:15.149 and it defines your entire experience with the 00:09:15.149 --> 00:09:17.769 plan. What's the split? It all depends on whether 00:09:17.769 --> 00:09:20.629 you are considered a new borrower on or after 00:09:20.629 --> 00:09:24.009 July 1st, 2014. Okay, and I'm guessing new borrower 00:09:24.009 --> 00:09:26.990 has a very specific technical definition. Oh, 00:09:27.009 --> 00:09:29.730 it does. It means you had no outstanding balance 00:09:29.730 --> 00:09:31.789 on any other federal student loan when you took 00:09:31.789 --> 00:09:34.769 out a new loan on or after that date. Whoa, wait. 00:09:34.889 --> 00:09:38.529 So if I had a tiny loan from, say, 2012, and 00:09:38.529 --> 00:09:39.909 then I went back to grad school and took out 00:09:39.909 --> 00:09:43.279 a huge loan in 2015. I'm not a new borrower. 00:09:43.639 --> 00:09:46.600 Correct. You're not. You get grandfathered into 00:09:46.600 --> 00:09:50.440 the older, less favorable IBR terms, even if 00:09:50.440 --> 00:09:53.379 99 % of your debt came after that 2014 date. 00:09:53.539 --> 00:09:55.600 That feels like a real gotcha. It is a critical 00:09:55.600 --> 00:09:57.600 trapdoor. It trips up a lot of people. Okay, 00:09:57.659 --> 00:09:59.700 so let's break down the two tiers. What are the 00:09:59.700 --> 00:10:02.899 terms for the people who are genuinely new borrowers? 00:10:03.000 --> 00:10:06.080 If you are a new borrower on or after July 1st, 00:10:06.080 --> 00:10:08.820 2014, your terms are better. Your payments are 00:10:08.820 --> 00:10:11.659 10 % of discretionary income and you get forgiveness 00:10:11.659 --> 00:10:14.000 after 20 years of payments. And for everyone 00:10:14.000 --> 00:10:16.500 else, the older borrowers or the people caught 00:10:16.500 --> 00:10:19.000 in that trap door? For them, the older borrowers, 00:10:19.000 --> 00:10:21.779 the payment is higher 15 % of discretionary income 00:10:21.779 --> 00:10:24.269 and forgiveness takes longer. It's granted after 00:10:24.269 --> 00:10:26.789 25 years of qualifying payments. So you pay more 00:10:26.789 --> 00:10:29.990 for longer. You pay more for longer. It's a policy 00:10:29.990 --> 00:10:32.309 that basically penalizes people who have been 00:10:32.309 --> 00:10:34.929 in debt continuously for a long time. Why that 00:10:34.929 --> 00:10:38.070 date, July 1st, 2014? It sounds so arbitrary. 00:10:38.429 --> 00:10:41.429 What was the thinking behind creating two different 00:10:41.429 --> 00:10:44.070 versions of IVR? It was really about managing 00:10:44.070 --> 00:10:46.549 the cost of the program. They wanted to offer 00:10:46.549 --> 00:10:49.009 a better deal to the next wave of students, but 00:10:49.009 --> 00:10:51.649 they didn't want to retroactively apply those 00:10:51.649 --> 00:10:54.909 better terms and the higher costs to the government, 00:10:55.029 --> 00:10:57.029 to all the old debt that was already out there. 00:10:57.190 --> 00:10:59.590 It was a way to improve the program going forward 00:10:59.590 --> 00:11:01.769 without breaking the bank on the pass. And what 00:11:01.769 --> 00:11:04.429 about eligibility for IBR? It's not as open as 00:11:04.429 --> 00:11:07.450 ICR, is it? No, it has a gatekeeper. You have 00:11:07.450 --> 00:11:09.570 to demonstrate a need. It's basically a debt 00:11:09.570 --> 00:11:11.409 to income test. You have to show that you're 00:11:11.409 --> 00:11:13.549 calculated. IBR payment would actually be lower 00:11:13.549 --> 00:11:15.149 than what you'd pay on the standard 10 -year 00:11:15.149 --> 00:11:17.190 plan. So if your income is too high relative 00:11:17.190 --> 00:11:19.350 to your debt, you might not even qualify for 00:11:19.350 --> 00:11:21.769 IBR. Exactly. You could be pushed back into a 00:11:21.769 --> 00:11:23.730 standard plan. And let me flick back in on the 00:11:23.730 --> 00:11:27.529 parent PLUS caveat. Can you consolidate a parent 00:11:27.529 --> 00:11:30.929 PLUS loan to get into IBR? No, absolutely not. 00:11:31.009 --> 00:11:33.730 The sources are very clear on this. Parent PLUS 00:11:33.730 --> 00:11:37.250 loans are ineligible for IBR, and unlike ICR, 00:11:37.450 --> 00:11:40.210 consolidation does not help. So that door is 00:11:40.210 --> 00:11:43.750 firmly shut. It is. It really funnels those parent 00:11:43.750 --> 00:11:46.389 borrowers back toward that ICR plan we just talked 00:11:46.389 --> 00:11:49.009 about. Okay, so that brings us to the last of 00:11:49.009 --> 00:11:52.710 the legacy plans, PYE, or pay as you earn, another 00:11:52.710 --> 00:11:55.870 Obama -era plan. Right, and PYE offered really 00:11:55.870 --> 00:11:58.529 good terms, payments at 10 % of discretionary 00:11:58.529 --> 00:12:00.570 income, and it brought back that all -important 00:12:00.570 --> 00:12:02.669 cap. The one that ensures your payment never 00:12:02.669 --> 00:12:04.730 exceeds the 10 -year standard amount. Exactly. 00:12:04.750 --> 00:12:07.190 For a lot of borrowers, that cap made it a better 00:12:07.190 --> 00:12:09.549 option than repay, which didn't have one. But 00:12:09.549 --> 00:12:12.039 there's always a but. The tradeoff for those 00:12:12.039 --> 00:12:14.700 good terms seems to be the absolute strictest 00:12:14.700 --> 00:12:17.600 eligibility rules we've seen yet. It is extremely 00:12:17.600 --> 00:12:19.679 restrictive. It feels like it was designed for 00:12:19.679 --> 00:12:22.360 a very, very narrow slice of borrowers. Or the 00:12:22.360 --> 00:12:24.480 rules. You have to hit two separate date requirements. 00:12:24.940 --> 00:12:27.519 First, you have to be a new borrower as of October 00:12:27.519 --> 00:12:30.600 1st, 2007, meaning no federal loan balance before 00:12:30.600 --> 00:12:33.299 that date. And second, you must have received 00:12:33.299 --> 00:12:36.320 a direct loan disbursement on or after October 00:12:36.320 --> 00:12:39.080 1st, 2011. So you need to meet both of those. 00:12:39.500 --> 00:12:41.919 If you meet the 2011 rule but had a tiny loan 00:12:41.919 --> 00:12:45.480 back in 2006, you're out. You're out. It's designed 00:12:45.480 --> 00:12:47.720 to exclude anyone who has been borrowing continuously 00:12:47.720 --> 00:12:50.700 for a long time. It was clearly meant to limit 00:12:50.700 --> 00:12:53.220 the program's cost by targeting only the freshest 00:12:53.220 --> 00:12:55.620 debt. And I'm going to guess parent PLUS loans 00:12:55.620 --> 00:12:58.700 are, once again, out of luck. Once again, locked 00:12:58.700 --> 00:13:01.919 out. ineligible and consolidation can't get you 00:13:01.919 --> 00:13:04.700 in. We have to keep hammering this parent PLUS 00:13:04.700 --> 00:13:07.519 point because it is the single biggest roadblock 00:13:07.519 --> 00:13:10.039 for parent borrowers and a huge source of confusion. 00:13:10.340 --> 00:13:12.480 OK, so that's the old guard, a confusing mess 00:13:12.480 --> 00:13:15.299 of different rules and dates. It is. Now, let's 00:13:15.299 --> 00:13:17.419 pivot to what's happening right now. The big 00:13:17.419 --> 00:13:21.129 overhaul that replaced repay a. the saving on 00:13:21.129 --> 00:13:25.070 a valuable education or save E plan. Right. This 00:13:25.070 --> 00:13:28.190 was the latest and by far most generous attempt 00:13:28.190 --> 00:13:30.250 to fix federal loan repayment. And it was an 00:13:30.250 --> 00:13:31.649 immediate change for a lot of people, right? 00:13:31.750 --> 00:13:34.509 It was. If you were already on the old repay 00:13:34.509 --> 00:13:37.029 plan, you were automatically moved over to save. 00:13:37.230 --> 00:13:40.090 And really importantly, all your past payments 00:13:40.090 --> 00:13:42.409 under repay counted toward forgiveness under 00:13:42.409 --> 00:13:45.129 the newest A .V. rules. No starting over. No 00:13:45.129 --> 00:13:47.830 starting over. So one of the biggest features. 00:13:48.509 --> 00:13:50.269 And the one that got the most positive attention 00:13:50.269 --> 00:13:55.210 was how save deals with interest. Yeah. It tackles 00:13:55.210 --> 00:13:57.470 this awful problem of negative amortization. 00:13:57.529 --> 00:14:02.210 Yes. And negative amortization is it's a soul 00:14:02.210 --> 00:14:04.409 crushing part of student loans. It's when your 00:14:04.409 --> 00:14:06.809 monthly payment is so low that it doesn't even 00:14:06.809 --> 00:14:08.649 cover the interest that's piling up. So you're 00:14:08.649 --> 00:14:10.330 making payments every single month, but your 00:14:10.330 --> 00:14:12.970 loan balance just keeps going up. Exactly. It's 00:14:12.970 --> 00:14:15.629 a psychological and financial nightmare. Under 00:14:15.629 --> 00:14:18.409 savee, that is basically eliminated. The policy 00:14:18.409 --> 00:14:20.710 guarantees that if your required payment doesn't 00:14:20.710 --> 00:14:22.789 cover the full amount of the interest, the government 00:14:22.789 --> 00:14:24.409 just covers the rest. Your loan balance will 00:14:24.409 --> 00:14:26.470 never go up as long as you're making your required 00:14:26.470 --> 00:14:29.450 payment. That is the explicit promise. The goal 00:14:29.450 --> 00:14:32.289 is to make sure loans never grow because of unpaid 00:14:32.289 --> 00:14:35.509 interest. And this is a huge step up from repay, 00:14:35.830 --> 00:14:38.190 which only covered half of the unpaid interest. 00:14:38.549 --> 00:14:41.399 Savee covers all of it. And that part of the 00:14:41.399 --> 00:14:43.620 plan seemed to be pretty stable, legally speaking. 00:14:43.860 --> 00:14:45.899 It does. It's one of the least challenged features, 00:14:46.019 --> 00:14:48.320 and it's been a revolutionary change for low 00:14:48.320 --> 00:14:50.299 -income borrowers. Okay, what about the payment 00:14:50.299 --> 00:14:53.470 caps? We see a split between undergrad and grad 00:14:53.470 --> 00:14:56.190 school debt. We do. For loans that are only from 00:14:56.190 --> 00:14:58.350 undergraduate study, the payments are set at 00:14:58.350 --> 00:15:00.970 10 % of that new, much smaller discretionary 00:15:00.970 --> 00:15:04.549 income amount, the income above 225 % of the 00:15:04.549 --> 00:15:07.169 poverty line. Okay. If you have a mix of undergrad 00:15:07.169 --> 00:15:09.789 and grad loans, your payment is a weighted average 00:15:09.789 --> 00:15:12.889 somewhere between 5 % and 10%. Now wait, you 00:15:12.889 --> 00:15:16.279 said 5 %? I definitely remember a big push to 00:15:16.279 --> 00:15:18.580 make the payment for undergrad loans just 5%. 00:15:18.580 --> 00:15:20.679 What happened with that? You remember correctly. 00:15:20.840 --> 00:15:23.059 That was a huge part of the original savee proposal, 00:15:23.399 --> 00:15:25.740 and it would have made undergraduate debt repayment 00:15:25.740 --> 00:15:28.720 even faster and cheaper. But our sources confirmed 00:15:28.720 --> 00:15:32.100 that specific proposal to lower the undergrad 00:15:32.100 --> 00:15:35.799 payment to just 5 % is currently blocked by a 00:15:35.799 --> 00:15:38.559 preliminary injunction. It's one of the key parts 00:15:38.559 --> 00:15:40.820 of the plan that's stuck in the courts. So another 00:15:40.820 --> 00:15:42.840 big hurdle for borrowers has always been the 00:15:42.840 --> 00:15:45.480 paperwork. You know, having to recertify your 00:15:45.480 --> 00:15:48.519 income and family size every single year. Did 00:15:48.519 --> 00:15:52.240 SAV make that any easier? It made huge strides. 00:15:52.259 --> 00:15:55.720 Under SAV, you can consent to have the IRS just 00:15:55.720 --> 00:15:57.840 automatically report your adjusted gross income 00:15:57.840 --> 00:16:00.120 directly to the Department of Education. From 00:16:00.120 --> 00:16:01.840 your tax returns. From your tax returns, exactly. 00:16:02.019 --> 00:16:04.639 It's a small change, but it's massive because 00:16:04.639 --> 00:16:06.860 it dramatically reduces the chance that you'll 00:16:06.860 --> 00:16:09.019 miss a deadline and get kicked off the plan and 00:16:09.019 --> 00:16:10.940 have your payment spike. And what about for married 00:16:10.940 --> 00:16:12.840 borrowers? You know, the strategy of filing. 00:16:12.940 --> 00:16:15.179 taxes separately to lower your payment. That's 00:16:15.179 --> 00:16:17.679 another big win in SAV. Under a lot of the old 00:16:17.679 --> 00:16:20.220 plans, sometimes your spouse's income would still 00:16:20.220 --> 00:16:22.759 be counted even if you filed separately. Under 00:16:22.759 --> 00:16:25.179 SAV, if you file separately, your spouse's income 00:16:25.179 --> 00:16:28.230 is never counted. End of story. So it gives married 00:16:28.230 --> 00:16:30.950 borrowers a lot more control. A ton more control. 00:16:31.029 --> 00:16:33.090 It's a huge benefit. But of course, the SAVE 00:16:33.090 --> 00:16:35.950 -E plan wasn't just about lower payments. It 00:16:35.950 --> 00:16:38.409 also proposed some really radical changes to 00:16:38.409 --> 00:16:40.870 forgiveness, right? Especially for people with 00:16:40.870 --> 00:16:43.409 smaller loan balances. It did. The key proposal 00:16:43.409 --> 00:16:48.100 was, well, it was targeted relief. Forgiveness 00:16:48.100 --> 00:16:50.320 for anyone with an original loan balance of just 00:16:50.320 --> 00:16:54.019 $12 ,000 after only 10 years of payments. 10 00:16:54.019 --> 00:16:56.679 years? That's half the normal time. Or even less. 00:16:56.700 --> 00:16:59.299 I mean, the standard is 20 or 25 years. This 00:16:59.299 --> 00:17:01.820 was designed to quickly clear the books for millions 00:17:01.820 --> 00:17:04.160 of people, like community college graduates, 00:17:04.400 --> 00:17:06.299 and let them get on with their lives. And it 00:17:06.299 --> 00:17:08.339 was a sliding scale, wasn't it, based on your 00:17:08.339 --> 00:17:10.579 original loan amount? Exactly. For every extra 00:17:10.579 --> 00:17:13.579 $1 ,000 you borrowed above that initial $12 ,000, 00:17:13.759 --> 00:17:16.000 you'd add one more year of payments. But it still 00:17:16.000 --> 00:17:18.210 capped out. out at 20 years for undergrad and 00:17:18.210 --> 00:17:21.089 25 for grad loans. It was just a way to provide 00:17:21.089 --> 00:17:23.450 much faster relief for people with smaller to 00:17:23.450 --> 00:17:25.450 medium sized debts. But as you've hinted, this 00:17:25.450 --> 00:17:27.230 is where the legal challenges really came in. 00:17:27.289 --> 00:17:30.910 What happened in 2024 and 2025 to block these 00:17:30.910 --> 00:17:33.289 key features? The whole legal landscape right 00:17:33.289 --> 00:17:36.430 now is just it's defined by instability. Our 00:17:36.430 --> 00:17:40.710 sources point to February 18th, 2025, ruling 00:17:40.710 --> 00:17:43.349 by a U .S. appeals court that was part of freezing 00:17:43.349 --> 00:17:45.450 the program. What was the argument against it? 00:17:45.789 --> 00:17:47.970 Why did the courts agree to block it? The argument 00:17:47.970 --> 00:17:51.130 really boils down to executive overreach. Opponents 00:17:51.130 --> 00:17:53.529 argue that these changes, especially the 5 % 00:17:53.529 --> 00:17:56.529 payment and the fast forgiveness, were so big 00:17:56.529 --> 00:17:59.009 and so costly that they were basically creating 00:17:59.009 --> 00:18:01.269 a new law. And that's something only Congress 00:18:01.269 --> 00:18:03.589 can do. That's the core of their argument, that 00:18:03.589 --> 00:18:05.289 the Department of Education doesn't have the 00:18:05.289 --> 00:18:07.109 authority under the existing Higher Education 00:18:07.109 --> 00:18:10.430 Act to make such massive changes without explicit 00:18:10.430 --> 00:18:13.349 approval from Congress. And the courts? at least 00:18:13.349 --> 00:18:16.410 for now, have agreed. For now, yes. A preliminary 00:18:16.410 --> 00:18:19.990 injunction from back on June 24th, 2024, specifically 00:18:19.990 --> 00:18:23.009 blocked both the 5 % payment rule and that entire 00:18:23.009 --> 00:18:25.390 accelerated forgiveness plan. So those parts 00:18:25.390 --> 00:18:28.609 of SAVY are just stalled, creating huge uncertainty 00:18:28.609 --> 00:18:30.710 for borrowers who were banking on them. And to 00:18:30.710 --> 00:18:33.289 make things worse, interest started piling up 00:18:33.289 --> 00:18:36.670 again for people on the SAVY plan. Yes. The sources 00:18:36.670 --> 00:18:39.130 confirm that interest resumed on August 1st, 00:18:39.130 --> 00:18:42.130 2025, right in the middle of all this legal chaos. 00:18:42.650 --> 00:18:45.450 This level of legal and political pressure, it 00:18:45.450 --> 00:18:47.589 must have caused chaos across the entire system, 00:18:47.650 --> 00:18:50.250 not just for SAVY. It absolutely did. The year 00:18:50.250 --> 00:18:54.069 2025 was just. It was defined by this system 00:18:54.069 --> 00:18:56.750 -wide administrative turmoil. We saw Congress 00:18:56.750 --> 00:18:59.210 trying to step in with things like the repayment 00:18:59.210 --> 00:19:02.549 assistance plan or RAP being enacted. But the 00:19:02.549 --> 00:19:04.349 actual government agencies, the infrastructure 00:19:04.349 --> 00:19:06.470 itself just couldn't keep up. It was fundamentally 00:19:06.470 --> 00:19:08.890 struggling. We have confirmation that the Department 00:19:08.890 --> 00:19:11.069 of Education actually had to temporarily suspend 00:19:11.069 --> 00:19:14.630 forgiveness under IBR in July of 2025 before 00:19:14.630 --> 00:19:16.910 restarting it in October. Imagine you're just 00:19:16.910 --> 00:19:18.869 months away from having your loans forgiven after 00:19:18.869 --> 00:19:21.309 20 years and you get that notice. It's terrifying. 00:19:21.549 --> 00:19:23.690 That cycle of hope and then withdrawal just creates 00:19:23.690 --> 00:19:26.170 massive distrust. And the most basic function, 00:19:26.329 --> 00:19:29.089 just applying for a plan, even that started to 00:19:29.089 --> 00:19:31.609 fail. That points directly to the application 00:19:31.609 --> 00:19:35.859 backlogs in late 2025. The source material makes 00:19:35.859 --> 00:19:39.019 it clear that this was made worse by these high 00:19:39.019 --> 00:19:41.339 level political efforts to restructure or even 00:19:41.339 --> 00:19:44.339 close parts of the Department of Education. So 00:19:44.339 --> 00:19:46.019 the political fights in Washington were having 00:19:46.019 --> 00:19:48.480 a direct impact on whether or not you could fill 00:19:48.480 --> 00:19:51.279 out a form online. A direct impact. It resulted 00:19:51.279 --> 00:19:54.839 in periods where applications were just unavailable, 00:19:54.880 --> 00:19:58.599 like the freeze from February 18th to March 26th, 00:19:58.599 --> 00:20:01.519 2025. It just shows that if the infrastructure 00:20:01.519 --> 00:20:04.789 can't process the requests. The policy itself, 00:20:04.990 --> 00:20:07.549 no matter how great it sounds, is functionally 00:20:07.549 --> 00:20:09.630 useless. It's not just about the rules. It's 00:20:09.630 --> 00:20:11.349 about whether the system can actually deliver 00:20:11.349 --> 00:20:13.849 on them. Precisely. All this volatility just 00:20:13.849 --> 00:20:15.690 shows how important it is for borrowers to be 00:20:15.690 --> 00:20:17.970 proactive. Yeah. So let's shift to the practical 00:20:17.970 --> 00:20:20.029 side. How does someone figure out what they qualify 00:20:20.029 --> 00:20:21.990 for and how do they make sure they're on the 00:20:21.990 --> 00:20:23.809 right track, especially if they're aiming for 00:20:23.809 --> 00:20:25.710 something like public service loan forgiveness? 00:20:26.009 --> 00:20:28.529 Right. The first step always is knowing exactly 00:20:28.529 --> 00:20:31.390 what kind of loans you have. We know direct loans 00:20:31.390 --> 00:20:34.210 are the main currency for IDR now, but a lot 00:20:34.210 --> 00:20:36.450 of people still have older types of loans. You 00:20:36.450 --> 00:20:38.329 mean things like the old federal family education 00:20:38.329 --> 00:20:41.569 loan, FFEL program loans, and federal Perkins 00:20:41.569 --> 00:20:44.529 loans? Exactly. If you have those, you can't 00:20:44.529 --> 00:20:47.150 just sign up for, say, V or IBR. You have to 00:20:47.150 --> 00:20:50.190 take an extra step. Which is consolidation. Consolidation 00:20:50.190 --> 00:20:52.750 is the key. You have to consolidate those old 00:20:52.750 --> 00:20:56.069 FFEL and Perkins loans into a new direct consolidation 00:20:56.069 --> 00:20:59.170 loan. Once you do that, that new loan becomes 00:20:59.170 --> 00:21:02.230 eligible for all the modern IDR plans. It's the 00:21:02.230 --> 00:21:04.970 essential bridge from the old system to the new 00:21:04.970 --> 00:21:07.259 one. So consolidation is the answer for those 00:21:07.259 --> 00:21:09.640 old loans, but we have to circle back to the 00:21:09.640 --> 00:21:12.319 parent PLOS loan problem one more time because 00:21:12.319 --> 00:21:14.099 that's where this strategy hits a wall, right? 00:21:14.220 --> 00:21:17.220 It's the ultimate parent PLOS caveat, yes. We 00:21:17.220 --> 00:21:19.740 have to be really clear. Parent PLOS loans are 00:21:19.740 --> 00:21:22.960 strictly excluded from IBR and PAYE. And while 00:21:22.960 --> 00:21:25.380 consolidation is the fix for other old loans, 00:21:25.460 --> 00:21:28.140 for parent PLOS loans, it only gets you so far. 00:21:28.359 --> 00:21:30.579 It only makes them eligible for ICR. It only 00:21:30.579 --> 00:21:33.079 opens the door to ICR, which is often the least 00:21:33.079 --> 00:21:36.059 generous plan. They remain locked out of IBR, 00:21:36.339 --> 00:21:39.880 PAYE, and the better parts of, say, VE, even 00:21:39.880 --> 00:21:43.319 after you consolidate. It forces so many of those 00:21:43.319 --> 00:21:45.680 parent borrowers into the plan with the highest 00:21:45.680 --> 00:21:48.500 payment percentage. OK, so assuming a borrower 00:21:48.500 --> 00:21:51.339 has figured out their loan types and consolidated 00:21:51.339 --> 00:21:54.180 if they need to, what's the next step? The first 00:21:54.180 --> 00:21:56.839 place to go is the online repayment estimator. 00:21:56.940 --> 00:21:59.369 On the student aid website? Yep. You can use 00:21:59.369 --> 00:22:01.690 that to get a really good estimate of what your 00:22:01.690 --> 00:22:03.609 monthly payment would be under all the different 00:22:03.609 --> 00:22:06.670 plans. But, and this is a really important distinction, 00:22:07.029 --> 00:22:09.869 it can only estimate your eligibility. To make 00:22:09.869 --> 00:22:12.150 it official, you have to talk to your loan servicer. 00:22:12.460 --> 00:22:14.319 You have to contact your loan servicer directly. 00:22:14.539 --> 00:22:16.200 They are the ones who can formally determine 00:22:16.200 --> 00:22:18.440 if you qualify. And if you're listening and you 00:22:18.440 --> 00:22:20.160 don't even know who your servicer is. You go 00:22:20.160 --> 00:22:22.200 to the National Student Loan Data System dot 00:22:22.200 --> 00:22:25.539 NSLDS dot ed dot gov. That's the official government 00:22:25.539 --> 00:22:27.220 portal where you can find out who holds your 00:22:27.220 --> 00:22:29.619 loan. OK, so once you're ready to actually apply. 00:22:30.430 --> 00:22:32.970 What's the process like now? Is it still a mountain 00:22:32.970 --> 00:22:35.650 of paperwork? It's gotten so much better. The 00:22:35.650 --> 00:22:38.309 goal has been to move everything online. You 00:22:38.309 --> 00:22:40.589 can submit the whole income -driven repayment 00:22:40.589 --> 00:22:42.509 plan request electronically now. And you can 00:22:42.509 --> 00:22:44.450 link it directly to the IRS, right? Yes, that's 00:22:44.450 --> 00:22:46.670 the key improvement. You can consent to have 00:22:46.670 --> 00:22:50.730 your AGI transferred directly from the IRS into 00:22:50.730 --> 00:22:53.049 your application. It cuts down on errors, it's 00:22:53.049 --> 00:22:55.750 faster, and it helps people stay enrolled. That's 00:22:55.750 --> 00:22:58.519 great if you have a job and you file taxes. But 00:22:58.519 --> 00:23:00.759 what about someone who's unemployed or has zero 00:23:00.759 --> 00:23:03.400 income? It can be hard to prove a negative. That 00:23:03.400 --> 00:23:05.940 is a crucial provision they built in. If you 00:23:05.940 --> 00:23:08.579 currently have no income, you can self -certify 00:23:08.579 --> 00:23:11.480 that fact. You don't need to try and find pay 00:23:11.480 --> 00:23:14.119 stubs that don't exist. You just attest that 00:23:14.119 --> 00:23:16.279 your income is zero. Which makes it much easier 00:23:16.279 --> 00:23:18.500 to get that $0 monthly payment you're entitled 00:23:18.500 --> 00:23:20.900 to. Exactly. It provides that critical relief 00:23:20.900 --> 00:23:24.829 right when you need it most. For a huge group 00:23:24.829 --> 00:23:27.250 of people, teachers, nurses, government workers, 00:23:27.490 --> 00:23:29.950 the end goal isn't 20 - or 25 -year forgiveness. 00:23:30.269 --> 00:23:33.009 It's public service loan forgiveness, or PSLF. 00:23:33.430 --> 00:23:36.930 And you cannot get PSLF without being on an IDR 00:23:36.930 --> 00:23:40.009 plan. The connection is mandatory. They are two 00:23:40.009 --> 00:23:43.509 halves of the same whole. The PSLF program promises 00:23:43.509 --> 00:23:45.509 forgiveness after 10 years of public service 00:23:45.509 --> 00:23:49.029 work and, critically, 120 qualifying monthly 00:23:49.029 --> 00:23:51.769 payments. And that phrase, qualifying payments, 00:23:52.009 --> 00:23:55.220 is where IDR comes in. That is the precise intersection. 00:23:55.480 --> 00:23:57.519 To make sure your payments count toward that 00:23:57.519 --> 00:24:00.180 120, you must be repaying your loans under one 00:24:00.180 --> 00:24:03.220 of the income -driven plans, like IBR or, say, 00:24:03.319 --> 00:24:05.859 VE. Payments you make on the standard plan, for 00:24:05.859 --> 00:24:09.140 example, do not count toward PSLF. So if you're 00:24:09.140 --> 00:24:11.599 a public servant, understanding IDR isn't just 00:24:11.599 --> 00:24:14.119 helpful, it's the absolute bedrock of your entire 00:24:14.119 --> 00:24:17.460 debt strategy. It is. You cannot succeed at PSLF 00:24:17.460 --> 00:24:20.819 without succeeding at IDR first. To really understand 00:24:20.819 --> 00:24:23.079 just how big these changes are, we need to zoom 00:24:23.079 --> 00:24:25.140 out a bit. I mean, this whole idea of tying payments 00:24:25.140 --> 00:24:27.720 to income isn't new, is it? Not at all. It's 00:24:27.720 --> 00:24:30.220 a policy idea that's been around for over half 00:24:30.220 --> 00:24:32.700 a century. Really? How far back does it go? The 00:24:32.700 --> 00:24:35.079 concept of income contingent repayment was formally 00:24:35.079 --> 00:24:37.420 proposed in the U .S. all the way back in 1971. 00:24:38.099 --> 00:24:40.700 So for 50 years, policymakers have known there 00:24:40.700 --> 00:24:43.119 was this structural problem that flat payments 00:24:43.119 --> 00:24:45.819 don't work when incomes fluctuate. And what's 00:24:45.819 --> 00:24:48.039 interesting is it seems to have had support from 00:24:48.039 --> 00:24:50.380 both sides of the aisle over the years. It has. 00:24:50.579 --> 00:24:53.119 It's been championed by politicians on the left 00:24:53.119 --> 00:24:55.400 and the right. Everyone sort of sees it as this 00:24:55.400 --> 00:24:58.720 essential safety valve to prevent mass defaults 00:24:58.720 --> 00:25:00.740 during a recession or just, you know, someone 00:25:00.740 --> 00:25:03.579 loses their job. It's a way to keep the system 00:25:03.579 --> 00:25:06.869 from completely breaking. The first actual plan 00:25:06.869 --> 00:25:09.769 didn't become law until the 90s. Right. The very 00:25:09.769 --> 00:25:11.849 first version, the ICR plan we talked about, 00:25:11.990 --> 00:25:14.670 was signed into law by President Clinton in 1993 00:25:14.670 --> 00:25:19.150 and rolled out in July 1994. And since that day, 00:25:19.250 --> 00:25:22.190 there has been a very clear, very consistent 00:25:22.190 --> 00:25:26.089 trend. Every single IDR plan that has come since, 00:25:26.170 --> 00:25:29.390 IBR, payee, repay, and now save, has offered 00:25:29.390 --> 00:25:31.470 more and more favorable terms for borrowers. 00:25:31.569 --> 00:25:33.769 Usually by lowering that payment percentage or... 00:25:34.000 --> 00:25:35.859 More recently, by raising the amount of protected 00:25:35.859 --> 00:25:38.460 income. Exactly. And that trend really picked 00:25:38.460 --> 00:25:40.440 up speed during the Obama administration. Leading 00:25:40.440 --> 00:25:43.440 to repay. Yes. President Obama announced the 00:25:43.440 --> 00:25:45.900 changes in 2014 that led to the launch of repay 00:25:45.900 --> 00:25:49.980 in December 2015. And that was really a critical 00:25:49.980 --> 00:25:52.940 moment. It was an effort to make a flexible repayment 00:25:52.940 --> 00:25:55.359 plan available to almost everyone, which set 00:25:55.359 --> 00:25:57.559 the stage for the mass adoption and the massive 00:25:57.559 --> 00:26:00.220 costs that we see today. And that history isn't 00:26:00.220 --> 00:26:02.440 just about dates and laws. It's about actual 00:26:02.440 --> 00:26:04.940 dollars in people's pockets. We have some data 00:26:04.940 --> 00:26:07.079 that shows this perfectly. It really illustrates 00:26:07.079 --> 00:26:10.059 the impact. It's for a single hypothetical borrower. 00:26:10.319 --> 00:26:13.339 One person with a consistent adjusted gross income 00:26:13.339 --> 00:26:17.000 of $50 ,000, and we're using constant $20, $25 00:26:17.000 --> 00:26:20.019 to compare across the eras. This is the perfect 00:26:20.019 --> 00:26:21.900 way to see how those policy levers we talked 00:26:21.900 --> 00:26:24.259 about, the poverty threshold, the payment percentage, 00:26:24.420 --> 00:26:26.720 actually work. So let's start at the beginning. 00:26:26.940 --> 00:26:30.200 Under President Clinton's original 1993 ICR plan 00:26:30.200 --> 00:26:33.259 with its 20 % payment rate, that borrower would 00:26:33.259 --> 00:26:36.980 have paid $572 .50 a month. That is a serious 00:26:36.980 --> 00:26:39.700 chunk of change, a huge monthly bill. We jump 00:26:39.700 --> 00:26:42.500 forward to 2007, to the IVR plan under the Bush 00:26:42.500 --> 00:26:44.460 administration. The payment percentage dropped 00:26:44.460 --> 00:26:47.839 from 20 % to 15%. Right. And that one change 00:26:47.839 --> 00:26:50.960 alone caused the monthly payment to fall to $331 00:26:50.960 --> 00:26:55.160 .56. Just by lowering the percentage, they saved 00:26:55.160 --> 00:26:58.319 that person almost $250 a month. Then came President 00:26:58.319 --> 00:27:01.279 Obama's 2015 repayee plan, and the percentage 00:27:01.279 --> 00:27:03.980 dropped again, this time to 10%. And the payment 00:27:03.980 --> 00:27:08.839 dropped with it, down to $221 .04 a month. You 00:27:08.839 --> 00:27:11.680 can just see this steady legislative march toward 00:27:11.680 --> 00:27:14.859 making payments more affordable. And now, now 00:27:14.859 --> 00:27:17.319 we get to the Biden administration's SAV plan. 00:27:17.740 --> 00:27:20.059 And this is where both policy levers get pulled 00:27:20.059 --> 00:27:22.559 at once. You have the 10 percent payment, but 00:27:22.559 --> 00:27:24.700 you also have that huge shift in protected income 00:27:24.700 --> 00:27:28.099 from 150 percent to 225 percent of the poverty 00:27:28.099 --> 00:27:31.099 line. The combination is just radical. So what 00:27:31.099 --> 00:27:32.720 does that do to the monthly payment for our same 00:27:32.720 --> 00:27:36.420 person with a $50 ,000 AGI? For that same exact 00:27:36.420 --> 00:27:38.579 person, their required monthly payment under 00:27:38.579 --> 00:27:40.940 SaveE for undergraduate loans plummets to just 00:27:40.940 --> 00:27:44.539 $61 .62. That is just a staggering drop from 00:27:44.539 --> 00:27:47.000 $600 a month under the first plan to just over 00:27:47.000 --> 00:27:49.400 $60 today. For the same person with the same 00:27:49.400 --> 00:27:51.420 income and the same debt. It just shows you that 00:27:51.420 --> 00:27:53.880 the entire game is in the details of that discretionary 00:27:53.880 --> 00:27:56.279 income formula. It is everything. But those huge 00:27:56.279 --> 00:27:59.359 savings for individuals, they obviously translate 00:27:59.359 --> 00:28:01.819 into huge expected costs for the federal government. 00:28:02.109 --> 00:28:05.210 This is the macroeconomic dilemma, yes. And it's 00:28:05.210 --> 00:28:07.009 why we're seeing all the legal and political 00:28:07.009 --> 00:28:10.369 fights. The programs worked maybe too well, some 00:28:10.369 --> 00:28:13.329 would argue, and the adoption rate just exploded. 00:28:13.349 --> 00:28:15.849 How fast did it grow? The Department of Education 00:28:15.849 --> 00:28:18.670 data in our sources is just mind -boggling. The 00:28:18.670 --> 00:28:21.250 share of all direct loan dollars being repaid 00:28:21.250 --> 00:28:25.609 through IDR went up by 625 % in just four years, 00:28:25.829 --> 00:28:28.630 from the 2011 group of borrowers to the 2015 00:28:28.630 --> 00:28:31.250 group. So everyone rushed into these plans. It 00:28:31.250 --> 00:28:33.549 was a flood. And that rapid growth means the 00:28:33.549 --> 00:28:35.730 government now expects to lose a lot more money 00:28:35.730 --> 00:28:37.849 on these loans than it originally planned. Because 00:28:37.849 --> 00:28:39.369 of the forgiveness on the back end. Exactly. 00:28:39.710 --> 00:28:41.910 They calculate something called the subsidy cost, 00:28:42.089 --> 00:28:44.440 basically, the net loss they expect. And during 00:28:44.440 --> 00:28:47.660 that same 2011 to 2015 period, the total subsidy 00:28:47.660 --> 00:28:51.799 costs for IDR plans went up by 748 percent, from 00:28:51.799 --> 00:28:55.940 $1 .4 billion to $11 .5 billion. And that exponential 00:28:55.940 --> 00:28:58.180 growth in the government's expected losses is 00:28:58.180 --> 00:29:00.140 the fuel for all the political fights we're seeing 00:29:00.140 --> 00:29:02.329 today. It is the foundational reason for the 00:29:02.329 --> 00:29:04.210 lawsuits, the administrative pressure, and the 00:29:04.210 --> 00:29:06.549 attempts to block or restructure these programs. 00:29:06.910 --> 00:29:09.089 It's all about that bottom line. And when you 00:29:09.089 --> 00:29:11.970 look at the total amount of loan relief that 00:29:11.970 --> 00:29:14.289 has actually been approved recently, the numbers 00:29:14.289 --> 00:29:16.799 are just astronomical. The Biden administration 00:29:16.799 --> 00:29:21.579 approved a total of $189 billion in cancellations 00:29:21.579 --> 00:29:24.980 for 5 .3 million people. The scale is unprecedented. 00:29:25.299 --> 00:29:27.240 And if you break that number down, the biggest 00:29:27.240 --> 00:29:30.599 piece, $78 .5 billion, went to over a million 00:29:30.599 --> 00:29:32.640 people through public service loan forgiveness. 00:29:33.000 --> 00:29:34.960 And that's a program that was famously broken 00:29:34.960 --> 00:29:38.160 for years. Famously. Before this big administrative 00:29:38.160 --> 00:29:40.900 push, only about 7 ,000 people had ever been 00:29:40.900 --> 00:29:42.940 approved. So this was a massive course correction 00:29:42.940 --> 00:29:45.390 to fix a program that just wasn't working. What 00:29:45.390 --> 00:29:47.410 about the IDR programs themselves? That was the 00:29:47.410 --> 00:29:50.829 next biggest piece. $57 .1 billion in cancellation 00:29:50.829 --> 00:29:53.650 came from what's called the IDR adjustment. That 00:29:53.650 --> 00:29:56.630 was for over 1 .45 million borrowers. And what 00:29:56.630 --> 00:29:58.769 was that adjustment for? It was designed to fix 00:29:58.769 --> 00:30:01.609 decades of bad record keeping and administrative 00:30:01.609 --> 00:30:04.549 errors by the loan servicers. To give you some 00:30:04.549 --> 00:30:07.630 context, before that adjustment, only about 50 00:30:07.630 --> 00:30:09.710 people had ever gotten forgiveness through IDR. 00:30:09.789 --> 00:30:12.329 It just shows how broken the tracking was. 50. 00:30:12.680 --> 00:30:16.220 50. And then another $5 .5 billion went to people 00:30:16.220 --> 00:30:18.500 who were already on the new, say, VE plan. And 00:30:18.500 --> 00:30:21.480 the rest of that $189 billion was for other targeted 00:30:21.480 --> 00:30:24.880 relief programs. Yes. Billions more went to people 00:30:24.880 --> 00:30:26.799 who were defrauded by their schools or whose 00:30:26.799 --> 00:30:28.740 schools closed down and to borrowers who are 00:30:28.740 --> 00:30:31.619 totally and permanently disabled. It all just 00:30:31.619 --> 00:30:34.380 underscores that IDR is now the primary vehicle 00:30:34.380 --> 00:30:37.240 for forgiving federal student debt on a massive 00:30:37.240 --> 00:30:40.259 scale. So we have covered a huge amount of ground 00:30:40.259 --> 00:30:42.500 here. We've been through a true legislative thicket. 00:30:42.799 --> 00:30:44.819 For you, the listener, what are the critical 00:30:44.819 --> 00:30:46.420 takeaways from all of this? I think there are 00:30:46.420 --> 00:30:49.440 three big ones. Okay. First, IDR is not just 00:30:49.440 --> 00:30:52.460 some niche option anymore. It has become a necessary 00:30:52.460 --> 00:30:55.119 core mechanism for managing student debt in a 00:30:55.119 --> 00:30:58.769 world of high costs. volatile incomes. Second, 00:30:58.970 --> 00:31:00.829 and this is probably the most important practical 00:31:00.829 --> 00:31:04.009 point, the single biggest thing that determines 00:31:04.009 --> 00:31:06.329 your payment is that definition of discretionary 00:31:06.329 --> 00:31:10.789 income. That policy shift from 150 % to 225 % 00:31:10.789 --> 00:31:13.269 of the poverty line under Seva Fron is everything. 00:31:13.470 --> 00:31:15.809 It's the reason payments have fallen so dramatically 00:31:15.809 --> 00:31:18.289 for so many people. And third, and this is the 00:31:18.289 --> 00:31:21.109 warning, you have to understand that the current 00:31:21.109 --> 00:31:23.369 administrative landscape is incredibly volatile. 00:31:23.869 --> 00:31:25.970 It is. The legal blocks on a save -a -toy, the 00:31:25.970 --> 00:31:28.450 temporary freezes on forgiveness, the application 00:31:28.450 --> 00:31:31.390 backlogs. It all means that if you're relying 00:31:31.390 --> 00:31:33.509 on these programs, you have to be hypervigilant. 00:31:33.529 --> 00:31:35.390 You have to monitor your account constantly. 00:31:35.609 --> 00:31:37.309 Yeah. If these programs keep growing at this 00:31:37.309 --> 00:31:39.470 rate with hundreds of billions in expected costs 00:31:39.470 --> 00:31:41.430 and a 600 -plus percent increase in enrollment, 00:31:41.789 --> 00:31:44.410 the question of stability is just unavoidable. 00:31:44.799 --> 00:31:47.019 It is. And that leaves us with a final thought 00:31:47.019 --> 00:31:49.559 for you to think about. Given the vast multi 00:31:49.559 --> 00:31:52.559 -billion dollar costs of IDR, the fragility of 00:31:52.559 --> 00:31:55.660 the system we saw with the 2025 freezes, and 00:31:55.660 --> 00:31:57.900 the constant political pressure for even more 00:31:57.900 --> 00:32:00.980 debt relief. How will the U .S. government balance 00:32:00.980 --> 00:32:04.400 those political demands with the practical, financial 00:32:04.400 --> 00:32:07.400 and administrative stability needed to actually 00:32:07.400 --> 00:32:09.759 run these incredibly complex programs over the 00:32:09.759 --> 00:32:12.079 long term? That tension between the political 00:32:12.079 --> 00:32:14.819 promise and the administrative reality is what's 00:32:14.819 --> 00:32:16.940 going to define student debt policy for years 00:32:16.940 --> 00:32:19.400 to come. We really encourage you to start your 00:32:19.400 --> 00:32:21.980 own verification process today. Yes. Go check 00:32:21.980 --> 00:32:23.960 your loan status at the National Student Loan 00:32:23.960 --> 00:32:27.779 Data System dash NSLBS dot ed dot gov dash dash 00:32:27.779 --> 00:32:30.200 and use that. repayment estimator online. See 00:32:30.200 --> 00:32:32.279 where you stand under these confusing but potentially 00:32:32.279 --> 00:32:35.279 life -changing repayment options. Until next 00:32:35.279 --> 00:32:37.539 time, stay well informed and keep diving deep.