63: All of Your Student Loan Questions Answered with Loan Sense Founder Catalina Kaiyoorawongs
Catalina Kaiyoorawongs is the founder of Loan Sense, a service-based platform that helps individuals understand their best plan for paying back student loans. I posed listener questions to Catalina and she shared her expert advice.
Student Loan Questions
Can I raise my credit score if I have 6-figures of student loan debt?
Should I take a low-paying job that qualifies for Public Student Loan Forgiveness (PSLF)?
What do I need to consider about home-buying with a spouse when we have student loan debt?
I need help understanding the different payback options on the government’s student loan website.
Is the pause on federal student loan payments going to continue beyond the fall of 2021?
Do you think we will get federal student loan forgiveness of $10-50k like some government officials are proposing?
I won’t qualify for PSLF because I’m self-employed, what other options do I have to reduce my student loan burden?
Should my partner and I just give up on the idea of buying a home since we both have student loan debt?
More About Loan Sense
Loan Sense is a service-based platform to help people make informed decisions about how to best save money by paying back their student loans. They don’t have a “refinance first” methodology because they know refinance isn’t the right approach for more than 50% of borrowers. They take an individualized approach in helping you understand what’s best based on your financial goals.
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Lindsay Bryan-Podvin: Hello everybody. My name is Lindsey Bryan-Podvin. I'm the founder and CEO of Mind Money Balance. I'm a financial therapist who helps people with the emotional side of money. And today I wanted to bring on a guest, or maybe you're watching this on Catalina's channel and I am her guest to talk about the more practical side of a series of questions that so many people wonder, which is student loans. So let me briefly introduce Catalina Kaiyoorawongs. Catalina is a graduate of Columbia and University of Michigan and a Gates Foundation fellow. She is well versed in the federal education policy and creating impactful financial programs for higher education in four years. At as an associate director at UnidosUS, Catalina increased their funding fivefold and launched programs that assisted over 300 students to secure a million dollars in grant funding, which placed Sarasota County number one in Florida's FSA completion while at the University of Michigan, she built the foundation for LoanSense, which we'll be talking about today, by counseling her peers in over 50 million in student loan debt on an Excel sheet. So don't knock those Excel sheets and use those same algorithms to build out loan senses, products and tools. Catalina, I'm so happy you are going to be answering some of the logical, logistical sides of the loans questions. I'm so happy to be chatting with you.
Catalina Kaiyoorawongs: Yeah, excited to be here too. I do wanna really quickly Say that so many people come to us because of the emotional side of managing student loans, though, which is it's incredibly stressful, scary, and anxiety provoking. So we know the reason people come to us is, is because it's driven by the emotional side, less of the logical side, but we wanna also be there for people to support them, but then of course provide them the information, the knowledge they need to feel more confident as they move forward. So I just wanted to recognize the emotional side is just so gigantic when it comes to student loans.
Lindsay Bryan-Podvin: Yes. Yes it is. And it's interesting you bring that up because today, the day that we're recording, I put out an Instagram post that said that financial procrastination is a symptom of financial anxiety and financial procrastination is putting off those tasks that are on your to-do list that you know you need to do when it comes to your money. And I hear again and again, these big questions about student loans come up and part of helping people with procrastination is tackling the emotional side of it, but also having quality answers from a qualified professional. And that's why I put out the call to my audience to say, give me all your student loans questions. I'm gonna bring on Catalina. She's going to help us out. I have a li list of questions and, and I'm really excited to have you here to answer them for two reasons.
Lindsay Bryan-Podvin: One is that having. Have their question answered, helps with their financial anxiety, gives them a, a little bit of education, a little bit of knowledge. But the other piece is that hearing questions, even if it wasn't your question, being asked or being answered, helps to normalize that we all have questions about student loans.
Lindsay Bryan-Podvin: And so even if you don't have the same. Question that are going to be asked and answered here. I imagine you'll get a lot of value just from this conversation and by normalizing talking about money specifically about student loans. So, Catalina, are you ready for these questions? Okay. So these are in no particular order.
Lindsay Bryan-Podvin: But I kind of grouped them into everyday folks questions. And then later on we'll be talking specifically about questions for folks who are self-employed. A lot of my audience members are therapists who are self-employed, so they'll be kind of divvied up that way. So the first question that a reader wrote in was, is it possible to raise my credit score into the high seven hundreds when I have six figures of student loan?
Catalina Kaiyoorawongs: So, credit scores and credit is a big issue that people often think "oh man, is managing my debt gonna hugely impact the way I manage my debt? Whether I get on an income driven plan, maintain the current plan, what does that mean to my credit score?" And here's the news: the news is your credit score is calculated based on, I have an entire video, by the way. So if you come to my channel, that that basically educates you on how credit is calculated. But student debt is a mix of credit, which actually helps your score. And then there's a part of the score that includes utilization of credit. So what will fluctuate your score more is if you have a $5,000 credit card limit and you get, because you're moving, you have all these expenses, let's say, and you max it to like 4,500. That will more likely affect your credit than the amount of student loan debt you have because it's not revolving credit.
Catalina Kaiyoorawongs: I'm not saying that it doesn't affect your score at all. I'm saying that it affects your score less than revolving credit and high utilization on something like a credit card, it still affects it because it still affects that debt level compared to your income. So I'm not saying it has no implication, but if you're worried about your credit score getting dinged due to debt, well, number one, if you've already taken out the debt, that's less you can control, but focus on the utilization of your revolving credit, which you have more control over right now.
Catalina Kaiyoorawongs: So there are things you can do to actively improve your credit if you are a student loan borrower. Which is number one: get your annual credit report every single year. Make sure to look at it. Make sure you haven't been a victim of identity theft, where people are opening credit cards in your name. Another big tip is just paying your student loan on time no matter what.
Catalina Kaiyoorawongs: So if the payment is too high, figuring out what an alternative is and it's better to just pay on time at a lower amount if you can't afford the higher. Then it is to say, "oh, I'm gonna go into forbearance. I'm not gonna pay it, whatever," because those decisions will highly impact your credit. So paying on time and controlling your credit card utilization rate are methods to improve your credit, despite having six figures of student loan debt.
Lindsay Bryan-Podvin: Okay. Can you break down for us, and I know you have a full video on it, but just briefly explain what revolving credit is? What are, what types of credit are considered revolving?
Catalina Kaiyoorawongs: Oh, that's a great question. Thank you for that. Yeah. Let's say you go get a car loan, right? You go get a student loan, you go get a car loan, you go get a mortgage. Even those are not revolving credit because you have a fixed credit limit for those products. You, you're not gonna, your car loan is for fixed amount. Let's say it's a $20,000 car loan. That's not revolving because you're not using it at different rates every month. Your fixed amount for that car is 20,000.
Catalina Kaiyoorawongs: It's not revolving as in your credit card. One month you might use $600. One month you might use $2000. Right? So that amount can fluctuate month to month and that's called revolving credit. Does that make sense?
Lindsay Bryan-Podvin: Makes perfect sense. I appreciate that breakdown.
Lindsay Bryan-Podvin: So you're saying, when it comes to raising your credit score into the high 700s, when you have six figures of student loans, what I heard you say is, yes, the student loans impact your credit score, but also check out all the other things that impact your credit, your credit score, which you obviously break down in your video, but revolving credit, things like a credit card that you know your use can go up and down each month can be more impactful.
Catalina Kaiyoorawongs: Right. It could literally fluctuate your credit score, like if you max out that credit card, it could drop your credit score like 50, 60 points. Wow. To just be really well, and it's temporary, but be mindful if you want to take out a mortgage or you're trying to think about what that next financial step is. Just be mindful. You know, checking your annual credit and being mindful of how you use that revolving credit because that has greater impact and paying your student loans on time than it is like trying to control past decision you've made already.
Lindsay Bryan-Podvin: Yeah, and what I appreciate about that answer is you've already made the decision to take out student loans. You already had them. So now it's about moving forward and taking action on different choices. So the next question comes from someone who is trying to make a difficult choice. They say, should I take a low paying job that meets criteria for public student loan forgiveness? The low paying job is about a $45,000 annual salary, and this person's student loans are around $40,000, so I think that's a really good.
Lindsay Bryan-Podvin: Question of is it worth it to take a low paying job in the hopes that they meet criteria for public student loan forgiveness, or seek out a higher paying job and work on paying those loans without getting public student loan forgiveness. So what's your hot take on this one?
Catalina Kaiyoorawongs: So this is an analysis our student loan advisors help people do very regularly and I, I believe I also have a video on this. A little dated in terms of, I did it a while ago, but this is a decision. Our student loan advisors Help people make, and I can't give you a blanket yes or no because it's an analysis, right? And this is the analysis of the two things to think about in a decision.
Catalina Kaiyoorawongs: There's always a what is the cost of the decision versus the cost of not making the decision, right? You have to balance both. There's a lot of people only focus on the cost of making the decision, and they don't focus on the cost of not making the decision, which is called an opportunity cost. Right?
Catalina Kaiyoorawongs: Right. So how I think about this, Calculate number one, and you could use our software to start this analysis for completely free because you get that preliminary student loan analysis. Calculate what is your projected amount of forgiveness, right? Number one over 10 years versus what is the amount of salary gain you will experience over those 10 years?
Catalina Kaiyoorawongs: And I know there are projections, but let's say for example, let's say in this case, If you owe $40,000 of student loans and you make $45k, your amount of monthly payment reduction will be fairly low because you're, it's called debt to income. Your student loan debt divided by your annual income is below one, as in 45 divided by 45 is, I mean, if you make 40 right?
Catalina Kaiyoorawongs: Or you make 45, I think that the equation is correct. 45 divided by 45 is one. So 40 divided by 45 is less than one. That means that your monthly payment reduction by going on to PSLF is gonna be fairly low, which means you have to calculate over 10, 10 years, or even this year, let's say you only know this year I'm gonna reduce my monthly payment from going on an income based plan or income driven plan, rather, let's say by a hundred bucks a month.
Catalina Kaiyoorawongs: I'm just gonna make it an easy, simple calculation. You're gonna save $1200 bucks. Okay, that's it. So if your salary, the threshold is super low. So if your salary, if you are foregoing a $60,000 annual job, it's just not worth it. Right? Yeah. Whereas some people might have like $120,000 of student loan debt and their reduction will be much, much, much greater.
Catalina Kaiyoorawongs: So it's in a matter of calculating how much will I save this year versus how much am I losing by not taking this job? Right. And so that's how you make the decision, understand how much you're saving on your student loans versus how much are you foregoing in that job. Yeah. And for everybody, that number will be different because they're getting different amount of student loan savings and they're foregoing a different amount in their job.
Catalina Kaiyoorawongs: Yeah. One final thing I wanted to in our economic analysis, we can never account for the pride and joy of doing a job. There is no number we can put to that. So if you say, I will be 10 times happier at this non-profit job, despite earning less than if I went to that corporate job that had me doing this thing, I hated.
Catalina Kaiyoorawongs: That is not in the economic calculation. You have to almost think about what number would I sign it? If you wanna include that in your analysis in the nonprofit versus the corporate, for all I know, you might really enjoy that corporate job and not the nonprofit job. So I'm not saying it has to be one way, but just think about that because that's something an economic analysis can never account for, for you personally, right?
Catalina Kaiyoorawongs: What do you enjoy and what brings a lot of reward to your work? That is very individual.
Lindsay Bryan-Podvin: I so appreciate both sides of that analysis. One is the number side of course, and then the other. You know, taking a job that brings you a level of fulfillment. So it sounds like obviously you can't advise based on not knowing all of these things, but in this case, it doesn't make a ton of financial sense to take a very low paying job when relatively speaking, their loans are pretty low.
Lindsay Bryan-Podvin: Okay, so the next question is more about life stages. Somebody asked, will getting married impact my monthly student loan payments?
Catalina Kaiyoorawongs: Yes. So I, I just wanna preface wrapping that last question into this question, because they're somewhat related in that every single financial decision you make around your student loans is completely individualized.
Catalina Kaiyoorawongs: So if you're having a tough time understanding what is this decision gonna cost me? Or what does this decision mean? I just wanna let you know that we are here to support you in making those decisions. So if you listen to this and you're like, I'm not fully clear on how do I think about this for my own situation, just know that we're here to support you and if you're about to get married or are married, which is related to this question, it's even more complex because the way the student loan policy and rules work right now is that if you are an income driven repayment plan and you get married and you file your income taxes jointly with your spouse, their payment will count towards your student loan. So it's really vital to understand what is the implication of getting married.
Catalina Kaiyoorawongs: Does my spouse have student loans? Do I only have student loans? If my spouse also has student loans? Then what are the tax implications of filing jointly versus separately if they also have student loans? So there's a multiple factor analysis. Number one, what is the savings to me as an individual versus my spouse? What is our current student loan?
Catalina Kaiyoorawongs: And number two, what is the implications of filing our taxes jointly or separately on our individual student loans, right? And then, how we calculate is we think of them combined and then we do an analysis. What saves more money? Filing my taxes, join there separately on each of our student loans?
Catalina Kaiyoorawongs: And for a lot of people, filing your income taxes separately might actually be more advantageous, especially if your spouse does not have student loans. Okay? If you're in a fully amortized payment, which means you're gonna pay off your entire loan balance, you're not on any type of special program, then your marriage tax filing status may not be as important. There are some tax implications on how you write off the interest, but that is not made more complex by the marriage tax filing status. Does that make sense? So just to summarize, it's completely individualized, but by entering your information for free in our software, you get that preliminary analysis.
Catalina Kaiyoorawongs: If your spouse also has student loans, they can also do that preliminary analysis for completely free. We have what's called a marriage tax calculator, and so we start to do that analysis for you for completely free. If you don't understand what it means in terms of what you should file versus what your spouse files, it can literally mean thousands of dollars of difference, not just you and your spouse's student loan payments if they have student loans, but it can also greatly impact if you try to buy a home together, because that's often what people do. They get married and then they think about family buying a home. It could also greatly impact how much your mortgage lender says you can borrow on your house.
Catalina Kaiyoorawongs: So there's a lot of implications, tax implications, mortgage lending implications. So it's really, really important to understand fully what you're signing up for not just when you get married, but by repaying your student loans and what plans best. I hope that helps.Yeah, it's very complex. Sorry.
Lindsay Bryan-Podvin: It is very complex and Catalina. Before I get back into the questions, I think this makes sense right now to have you explain a little bit about what LoanSense does and what services you offer, because I've played around on your website, I've played around with your calculators, I've attended some of your webinars. But for folks who don't know what you do, could you give us a little rundown of what Lone Sense does?
Catalina Kaiyoorawongs: Yeah, we should have probably started with that. But basically we are a tech enabled student loan advisory that basically answers all the questions other financial professionals can't, as in we understand mortgage credit rules, we understand student loan policy and we understand tax implications of the way what student loan programs you get into. So it's tech enabled because you get the preliminary analysis for free. But our service includes buying our concierge service, which we assign to you a highly trained student loan advisor who will walk you through a comprehensive plan that not just helps with your student loans, but can answer the implications of these student loans on other financial decisions like taking a job, buying a house. What happens to your taxes? What happens if you get married? What is the best time to file? But what the best part of what we do is we not just give you that personalized plan, we help you file and manage your paperwork into the federal programs if you decide that's the best route to take for.
Catalina Kaiyoorawongs: Does that make sense? And the second part of our product, if you're not quite sure you wanna meet with the loan advisor or want the concierge service, We also have the most commonly asked questions our advisors have answered over the last year or so in a digital Q&A format for just $47. So if you're like, "I'm not quite ready, but I wanna learn more," then you could buy into that program, and that gives you a $47 discount actually to the concierge service if you decide, "okay, now I'm ready to enroll." Right?
Catalina Kaiyoorawongs: So we have the two different options for. Basically, depending on what stage they're in, the earlier you start planning, like, I mean, if you're recently graduating, the better because then you're prepared and understand the implications of your decisions. And the more you owe, the more you really need to understand. A mistake can be very costly. The more money you owe. Yeah, so we always encourage people to get a full plan and get that financial, that student loan advisor on your side so that when questions do occur, we're there to provide answers for them so you're not alone.
Lindsay Bryan-Podvin: Yeah. And I, I so appreciate that information about what it is that you do and how you do it. And I love how your service folds in all of these different things. It folds in not just a narrow minded question of which, how should I pay my student loans down? It also incorporates are you planning on getting married in the next five years?
Lindsay Bryan-Podvin: Are you planning on buying a house in the next five years? Are you planning on moving? Are you planning on working for yourself? You ask more holistic questions than. Here's how you can lower your monthly rates. So I think that's really helpful. Which feeds into the next question that somebody wrote in about, which was I've wondered about the difference between all of the different repay repayment options that are offered on the government student loan website.
Lindsay Bryan-Podvin: For example, the income-based repayment option. It looks. So confusing. I'm not sure if it's a trap. I don't know what I'm signing up for. If it looks better now or if it's worse in the long run, hell. So they, I think this question really sums up what it feels like to start digging into trying to research things on your own.
Lindsay Bryan-Podvin: And you see one number and you're like, okay, that looks good. But then you start reading the fine print and you're trying to wrap your mind around it. So I guess, could you just help us understand like some of the common repayment options? I think that would probably be the most helpful. They specifically wanted to know about income based repayment.
Catalina Kaiyoorawongs: Yeah. Okay. So first of all, just to make sure everybody understands, income based repayment is one type of many different income driven plans. So I just wanna specify that, but income driven plans are the category of every plan the government has to offer. That's based on your income in one way, shape, or form.
Catalina Kaiyoorawongs: But it's not just based on income, it's based on your family size. It's also based on your, your employer status, right? If you work for non-profit employer or not and those types of factors that factor into as well as your marital status. Mm. So your marital status and the way you file your income taxes factor also into what plan is best and every different income driven plan calculates how it your interest accumulation slightly differently.
Catalina Kaiyoorawongs: I'm not gonna go into like every single detail on the different interest calculations. This is what I have to say. The number one pro tip to managing an income driven repayment plan is if you decide you will enroll, which you can use our help for, but if you decide I wanna do this, it is the most vital thing is to always file that paperwork annually on time, because the number one key to success in these programs is maintaining good standing in these programs.
Catalina Kaiyoorawongs: Because what will happen is if you don't maintain good standing and don't file your paperwork, the interest that the government is going to forgive will capitalize, which means it will be added on top of the original amount took out for your education and now instead of owing a hundred thousand and you let 20,000 capitalize, you now owe 120,000.
Catalina Kaiyoorawongs: Right, and that, that your daily interest will be calculated based on that 120 instead of the 100. Oh, wow. So it's really important that if you make a decision, yes, I wanna do this, make sure you're just maintaining into the plan. Right. So now directly to answer the question of. Is it good now but gonna harm you later?
Catalina Kaiyoorawongs: It will not harm you later, no matter what your decision is, if you wanna pay it off faster or get the forgiveness, if you just continue to file into the programs, what harms people is they file into it for a year or two and then stop. And then all the interests that isn't getting paid that's supposed to be forgiven, we'll now capitalize, and now your loan balance will go up.
Catalina Kaiyoorawongs: And that is like the government saying catch you, that catch you, that people hear about that they're so scared about is because people don't maintain the plans properly. But if you maintain the plans properly, it could be highly, highly advantageous because you can get all that accumulating interest forgiven by the government at the end of your payment term, depending on if you work for a non-profit or a for-profit. Does that make sense?
Lindsay Bryan-Podvin: Yeah, I, it, it makes sense. So the second part of this question is, it looks confusing what I heard you say: as long as you file your paperwork on time and are making whatever the agreed upon payment is, you're in good shape. Somebody had an additional question, like an add on to this suggestion, which is what happens if I pay more than what's required in an income driven plan? So what happens is it goes to pay off more of that accumulating interest> which, here's the thing, if you're good about filing your paperwork annually, and if you enroll in our program, we'll remind you when to file.
Catalina Kaiyoorawongs: Your paperwork will also help you do that so that you never get that capitalizing interest. We wanna help you avoid that. We will remind you at the 10 month mark from the first time you file. The point is, is all paying extra does is as you have that interest accumulating that the government will forgive if you maintain in the program.
Catalina Kaiyoorawongs: All you're doing is you're decreasing the amount of forgiveness you're gonna get. That's what it's doing. But let's say for example, you're like, "Hey, I'm now moving from a nonprofit to a private sector job. I'm gonna like almost double my salary, or I'm gonna make significantly more money." It doesn't make sense to try to get forgiveness because my salary doesn't justify that anymore. It's okay. Still continue to pay into the program, right? Still continue to file into the program and still continue to pay it. So if you make the decision at that point because you're like, "I'm not gonna get forgiveness, my salary's too high now," then if you accelerate it, that's good because you're not gonna get any forgiveness anyways. But just don't forget to file that paperwork, even if you decide you don't want a plan based on your income anymore, because you don't want any interest remaining to be added to the top of your balance. So it totally depends if you really want that forgiveness, then no, don't pay extra.
Catalina Kaiyoorawongs: Use that money for a long term savings retirement. Like if you save for retirement, it will actually decrease your monthly payment. And then you're basically using government programs to fuel your future savings. Right? Use it for down payment savings. If you have children, use it for your children's future. Use it for things that will build your assets if you're going towards forgiveness, if you're going to experience significant salary increases and you're not going to get forgiveness. It's very strategic decision to understand, "okay, I, I'm gonna pay down my student debt," but also recognize that there's a cost.
Catalina Kaiyoorawongs: The cost is you're, you're saving less for retirement. You're saving less for down payment. You're saving less for your children. Right? Whatever that decision alternative is, and just understand what that's gonna cost by paying more student loans. Right, because one final thought, Lindsay, if you don't mind. People make such fear based decisions around their student loans, and the fear is, I just need to pay down my student loans at all costs. Right. But they're not, they're not thinking about what is it really costing them by making this decision. And I'm gonna make a really crazy analogy of a doctor who came to us a few months ago, and I'm only using his analogy because it was so grave like, his situation was so big because he had so much debt.
Catalina Kaiyoorawongs: He basically freaked out because he got his interest capitalized, so he just started paying off his student loan debt as much as possible. He literally put a hundred thousand dollars towards his student loans because 50 of it capitalized. He just started acting with fear. And we said to him, after doing the analysis, it doesn't actually make sense because you're projected to get 200,000 of your student loans forgiven because he had spent five years in fellowship and he only had two more years to pay.
Catalina Kaiyoorawongs: You could have just gotten that extra 50,000 forgiven anyways. Like, why are you putting all this extra money? You could have ended up getting over 200 in forgiveness. So because of the CARES Act, we were able to help him call his servicer and get that $117,000 back. And he now used that money to buy a house and he paid 50% of a down.
Catalina Kaiyoorawongs: Almost 50% down payment on a house. So sometimes when you make a decision out of fear, you could be costing yourself a lot of money and, and maybe if you just stepped back and got like an analysis done that's more or less fear based and more of like just a pure economic decision, then you could feel that support.
Catalina Kaiyoorawongs: Okay, this is a really good direction for me, right? And this is what I can benefit from and gain. So now he's projected to get that 200 forgiveness and he now has a house. Instead of just putting all his money squirreling away towards the student loans and he would have no house and he would've no savings. Right. So what is the cost of the decision? Also has to be thought about.
Lindsay Bryan-Podvin: And Catalina, I appreciate you saying that example because in the personal finance space, the dominating message for decades has been, debt is bad, debt is bad, debt is bad, debt is bad. So you have all of these people who are paying down their debt.
Lindsay Bryan-Podvin: But they're so laser focused on it that they haven't considered where that money could be going if they were really you know, looking at it from a holistic viewpoint. And I think that's why I was so happy to have you talk about this because I knew that you weren't gonna talk about, you just have to pay off your loans as quickly as possible no matter what.
Lindsay Bryan-Podvin: It's like, no, you also have a life to live. The next two questions, crystal ball questions, these are the ones that everybody wants to know. The first one is, do you think federal student, federal student loan repayments, the pause that's currently on them will continue beyond the fall of 2021. If you had your crystal ball, what 's your best guess?
Catalina Kaiyoorawongs: So it's not even about my crystal ball, it's that I read student loan policy and news every single day. And what is suggest being suggested right now? From the Department of Ed as well as the Biden administration, as well as just senator's comments on Twitter and various things. It seems like September, end of September will be the last month. September will be the last month of the student loan. However, I just wanna say here's caveat. If you are really fearful of the upcoming payments after September, if you have been financially impacted by Covid 19, or have not been able to get as high of a salary as you had anticipated, you should definitely consider the federal programs because you can extend.
Catalina Kaiyoorawongs: Way lower monthly payments, including down to zero for an additional year based on the current policy that's in place today, and get it all counted towards loan forgiveness, especially if you're trying to go towards public service loan forgiveness. I mean, it counts towards regular loan forgiveness as well.
Catalina Kaiyoorawongs: So just keep that in mind. That if you cannot afford whatever that payment's gonna be, there are still options and still hope out there. Don't feel like, "oh my God, now I'm gonna have to start paying, you know, $700 and I can't afford it." You don't have to. If you really are not in a financial position, it will cause you financial ruin to do that. So just know there are options out there for you, but I unfortunately do not think it's going past September.
Lindsay Bryan-Podvin: Yeah. Yeah. Okay. Well that's, that's helpful to know that it's, it's your best hypothesis based on all the information that you are gathering. And then the next big can Catalina tell us her thoughts on question is, will we get blanket student loan forgiveness in the United States?
Catalina Kaiyoorawongs: Okay, so I've also obviously been following this a lot because I'm obviously supporter of student loan forgiveness. However, I don't believe, well, not only do I not believe the Biden administration has not budgeted any form of forgiveness into the congressional budget, which means he has no plans on giving blanket forgiveness, or he would have to budget for it, right?
Catalina Kaiyoorawongs: Because it's quite a bit of money. So it doesn't even look like the 10,000 before it was 50. Now they start talking about 10. It doesn't even look like the 10 thousand's gonna happen. But here's what I do think may happen. What I, and this is where the crystal ball comes in, what I do think may happen is Joe Biden will act very similar.
Catalina Kaiyoorawongs: President Biden will act very similar to how President Obama did. President Obama was the president that instituted public service loan forgiveness. So what I do think will happen is Biden may work with the Department of Ed's secretary to actually make the income driven plans more generous at a 5% of discretionary income instead of 10 or 15 or 20, depending on the loan plan type.
Catalina Kaiyoorawongs: So you'll be required to pay less each month and it will make the programs, they'll heal, they'll simplify the programs. So it's not as confusing. Supposedly they'll fund it more so that the monthly requirements for payment are even less, and it will give even more forgiveness options for public servants specifically, and it will target specific groups of individuals to give more forgiveness towards. And that's what I think this administration will work towards, if they work towards anything, it's not gonna be just blanket forgiveness.
Catalina Kaiyoorawongs: It's gonna be an iterative improvement on what exists and that's just how government works, right? It all constantly works on how do we iteratively improve. It's very rare that it comes out and it's like universal healthcare, like everything's changing next year. You know, it's, it's just rarely that way because there's just so many people to get buy-in from. Mm-hmm. that it's just hard to do.
Lindsay Bryan-Podvin: Yeah. Yeah. No, definitely. Okay, so the next few questions I have are from the folks who are in the mental health or healthcare space, and they are self-employed. So the self-employed folks are wondering, look, I know I won't qualify for public student loan forgiveness because I don't work in a nonprofit industry. What are some other options I can look into to reduce my federal student loan burden?
Catalina Kaiyoorawongs: Okay, so if you're still, because I know a lot of people still, even though they don't work, especially in social work, you don't work in a non-profit, but you still do, you know public service work. Mm-hmm. Right?
Catalina Kaiyoorawongs: Mm-hmm. you might work for, with people with siding scales, you might work, you know, who knows? You might do things that are considered public service. So if that's the case, I'm not saying everyone should do this, but if that's the case, there's a couple. Number one, either associating yourself with a non-profit who if you give enough hours to, they'll have a willingness to sign your public service loan forgiveness paperwork, or you can consider forming your own non-profit.
Catalina Kaiyoorawongs: Oh, those are a few things If you are already doing public service loan work, right? I'm not public service work. I'm not saying. You should do this if you're in a private practice seeing only private clients. I'm not promoting to do illegal things, but I am promoting to think about if you are already doing public service work, just because you work for an agency or something, or you're self-employed and you work for an agency, that doesn't mean you're not doing public service work.
Catalina Kaiyoorawongs: You could be doing public service work. And so if you are looking into those opportunities, right? The second thing. Even if you don't get public service loan forgiveness, there is regular loan forgiveness. Mm. So what I would recommend, even public servants, is our loan advisors, when you meet with them, they will give you what's called pro tips.
Catalina Kaiyoorawongs: And there are so many legal ways to get $0 payments including like filing your, in your forms between jobs, because that, that's considered a drop in income. If you file it, you get $0 for that year. And then you can still get an amount that you're not paying, that you're using those funds to pay towards other goals.
Catalina Kaiyoorawongs: You can still get loan forgiveness. So it totally depends on what your ultimate strategy is. What is your financial capability and what is your comfort level of holding on to debt? It, it's completely individualized. We don't judge people for whatever decision they need to make for themself, but there are still options out there.
Catalina Kaiyoorawongs: You don't have to only work for a nonprofit. Does that make sense?
Lindsay Bryan-Podvin: Makes perfect sense and so, so helpful. So staying in the self-employed realm, but shifting a little bit to physicians, somebody asked, what about a self-employed healthcare provider? Can they qualify for NHSC?
Catalina Kaiyoorawongs: Okay. So NHSC we've helped several people apply to those programs.
Catalina Kaiyoorawongs: You don't have to only be a physician. A lot of, in the state of Michigan, for example, social workers, if they work for hospitals or healthcare clinics in specific areas that work with predominantly Medicaid patients, they can get up to $200,000 of loan. So it's not just you have to be a physician, number one.
Catalina Kaiyoorawongs: Number two, you could be a social worker and get it social worker and get it. So if you really have a high amount of debt, look into those programs. It may be worth going to work somewhere for two years plus, depending on the program and the area two, in order to get those forgiveness programs right.
Catalina Kaiyoorawongs: So I wanted to say, Most of the time in order to get access to the NHSC programs, it's generally by working for an endorsed organization. The Health and Human Services have these endorsed. Facilities generally, you have to work for those in order to be considered for the program. So if you're like a self-employed person, not associated with the organizations that the Health and Human Services kind of endorse for this program, then you can't use those programs.
Catalina Kaiyoorawongs: But it's worth looking into and it's worth considering. Applying to to facilities that do get endorsed for these programs because it could mean a significant amount of loan forgiveness within a very short amount of time. Mm.
Lindsay Bryan-Podvin: Awesome. Okay. And then the last one's a little show and tell. So for the folks who are watching this on YouTube, you'll be able to kind of follow along with Catalina.
Lindsay Bryan-Podvin: The question is, How much should I be prepared to put down for a house when I have student loans and I'm self-employed? So we're gonna do a little show and tell here based on one of the amazing kind of calculators that Catalina has created on her platform. Okay?
Catalina Kaiyoorawongs: So first and foremost if you're part of Lindsay's, And you are, I don't mean to make this a pitch, but I just wanna make it clear, and you're interested in understanding, getting a plan, right? Understanding what the best options are for you and your spouse. Lindsay actually has her own landing page that describes like the gist of our service, a complete overview and mien.com/mine money balance. I'm sure she'll link it in both her podcasts as well as the YouTube site.
Catalina Kaiyoorawongs: The reason I tell you this is because her page does not at this point include the calculator. The calculator is on our website. It's literally called affordability calculator. And this tool, the point of this tool is, We wanted to show people if they qualified and enrolled themselves in, or got our help to also enroll them into a federal program.
Catalina Kaiyoorawongs: How much more house could they afford as a result of being on a lower payment plan? Because people think of student loans very much in isolation, but the way you file your student loans impact how much home you can afford. So in our calculator, I just put, okay, let's say I have $50,000 of earnings. And let's say I, I have $80,000 of of federal student loan debt, but you could put any amount, like it changes the calculations, obviously. $60,000 versus $80k, it doesn't really matter. And you put other forms of debt that you may have, including credit card debt, car payment. Let's say I have a $408 car payment. That's a very random number, but I just heard it earlier today. So I'm just using it. And let's say you have like a 6.5% interest rate, which is like the interest rate for graduate student loans. And let's say you have a family size of four, right? You and, and there's advanced settings.
Catalina Kaiyoorawongs: Let's say you're gonna put a down payment 3.5%, which by the way, I know that's the next question. So I'll save it for that question. But you don't even need to do step two, which is the advanced settings. It's more as the mortgage part. So basically what our tool here highlights is it, what it highlights is what is your fully amortized standard payment amount.
Catalina Kaiyoorawongs: Based on this, you're paying off every penny on that interest rate versus your family size, your income, and several factors. It doesn't take into account every single factor, right? A good amount of 'em what your payment could be. In this case, it's $89, which is reducing your student loans by, I'm sorry, I didn't mean to scroll by $800.
Catalina Kaiyoorawongs: If you reduce your student loans by $800, literally, what does it mean? The amount of house you can afford, this 800 extra dollars that now could be put instead of toward your student loans. It can be put be considered by your lender to be put toward your mortgage loan. Increasing your affordability by $132,000.
Catalina Kaiyoorawongs: So before you could afford $90,000 house because they're assuming you're gonna pay all $900 a month, and they're like, oh my God, your debt's too high. You can't afford that. If you were to go on one of the income driven repayment plans, which might not be exactly 89, but around 89, based on these factors, you now can afford a $222,000 house.
Catalina Kaiyoorawongs: That's 132,000 more. I'm not ever trying to endorse to go out and max out everything you can afford. Of course, we're not recommending that. What we are recommending though, is to understand the implications of holding student debt and understand the implications of paying your debt off versus what you're foregoing and understand.
Catalina Kaiyoorawongs: How your student loan decision impact your ability to get a house, your ability to retire, your ability to get married, et cetera. So this is one of the many tools we have built to help people just balance the decision of pay off debt faster, or actually go towards buying a house, right? Because you're still paying that rent payment, so that's equity.
Catalina Kaiyoorawongs: You're never gonna build. So if you do have the opportunity to buy the credit, and the ability and the stability and you know where you wanna be, then how does that impact you in terms of affordability, right?
Lindsay Bryan-Podvin: Yeah. Yeah. So yeah, so that is super helpful to see if you get help with your student loans using something like LoanSense, you can shift the amount of money that you're putting toward your student loans and put it toward equity in a home, which is what home affordability calculator does. So Catalina part two is how much money should we imagine that we're going to put down? Which is a really hard question to answer.
Catalina Kaiyoorawongs: No, it's not hard. So first, really quickly if you're interested in actually getting beyond an estimate and getting actuals, you just click this big blue button here. And then what it does is it explains this step. You get a free plan, you get a personalized plan, and then you can actually enroll in the Loan Sense program. If you want help. Not only do we help with the student loan side, we can also introduce you to a lender. Almost all 50 states, it's 49 states that we have been committed to being trained by us.
Catalina Kaiyoorawongs: So that they literally, their commitment has to be, don't turn people away to help them get a plan. So if you wanna buy a house and you meet with one of our student loan advisors, not only do we help with the student loan, we help you come up with a comprehensive home buying preparation plan. You will leave with an entire plan.
Catalina Kaiyoorawongs: Understanding how much you need to save for a down payment, understanding exactly how to pay off any debt and will understand exactly what are the implications for buying a house. And you'll actually leave with a very concrete plan. So now with that being said what should you expect to pay for a down payment?
Catalina Kaiyoorawongs: Right? I'm gonna stop screen sharing now. Basically people think, oh my gosh, I'm gonna buy a house. I have 20%. So if I'm gonna buy, you know, if I'm gonna buy a, you know, $300,000 house, I'm gonna have to save up $60,000, and that is simply untrue to qualify for. For conventional lending, you only need about a 3% savings. I never tell people just straight up 3% because there's gonna be closing costs associated with it. There's gonna be some moving costs, there's gonna be some other ancillary costs. So I would say about four to four and a half percent to be safe. So, That's part of understanding and why we decided to move towards helping people with the home buying prep plan because we can help you break down that savings from a monthly level based on how much you have saved now and when your goal is to buy a house.
Catalina Kaiyoorawongs: Right. We also have relationships with lenders who can also. Help you individually understand, can you qualify now? How much would you need? Exactly. And that could help fuel our basically down payment savings plan for you as well as our home buying plan for you. So just know you don't need 20%, you need less than that, but exactly how much also depends on, you know what loan program you're going towards.
Catalina Kaiyoorawongs: But it's about three to three and a half. What loan program are you going for? And also how competitive the market is. So there's a few factors, but you definitely don't need 20%.
Lindsay Bryan-Podvin: Ugh, what a relief for people, because I think that is the number that's been drilled into us. And it's also, yes, you can put down that much, but you also can put down a different number and not.
Lindsay Bryan-Podvin: Kind of have yourself living paycheck to paycheck. So Catalina, thank you so much for answering all of these questions. I know they were all over the place and you were such a champ to just jump in and fire away and answer those questions. Where can people find you and find more about loan sense if they are interested?
Catalina Kaiyoorawongs: Well, first of all, they should go to Lindsay's landing page MindMoneyBalance.com. I hope you'll leave that. Yep. And if the link's too long, put it on Bitly if you wanna follow, of course, because That's the best way. Then we'll know who you came through. And we will also be able to understand who Lindsay's audience may be and better build the tools as well as the advice for.
Catalina Kaiyoorawongs: People like you, right? People that are mental health professionals and that care about not just the logical side, but the emotional side of money. But you could also find me, by the way I release a video weekly on YouTube. So you could definitely follow me on youtube.com: @CatalinaKai
Catalina Kaiyoorawongs: I will make sure Lindsay has the link. But yeah, it's basically my channel titles. Catalina Kai, my last name just because otherwise it would run forever. But yeah, you're welcome to follow me there. And of course, as soon as you sign up, even if for a free estimate on Lindsay's landing page, you will be enrolled into our weekly pro tips and we send updated student loan policy in all types of information and keep everybody that logs into our app up to date on what's happening. Yes.
Catalina Kaiyoorawongs: And Catalina's newsletter that comes out weekly is so informative and they're often. Five minutes or less and I, I will like just binge on them.
Catalina Kaiyoorawongs: They're so good and straightforward, so highly recommend. As Catalina mentioned, everything that you heard today will be linked, whether you're watching on YouTube, it's down in the description box. If you're listening to it on the podcast, it's linked in the show notes. Nothing will be be hidden here and you'll be able to connect with her and find information about LoanSense as well.
Catalina Kaiyoorawongs: So thank you again so much and we'll hopefully everybody will find you over there.
Catalina Kaiyoorawongs: Thank you. Thanks for your time, Lindsay. Thanks for having me.