Christie Arkovich | Can You Build Wealth with 6-Figures in Student Loan Debt?
Davina Frederick: Hi, everyone,
and welcome back to the wealthy
woman lawyer podcast. I'm your
host, Nina Frederick, the
creator of wealthy woman lawyer
podcast and also the founder of
wealthy woman lawyer, which is a
coaching business that helps
women law firm owners scale
their law for businesses to and
through a million dollars with
total ease. And today, I am
super excited for today's
guests. Because this topic we're
going to be talking about is
hot, hot, hot. It is something
that so many of the names so
many people in the nation and so
many women law firm owners are
dealing with, and it can be a
real impediment to wealth,
unless we deal with it. So we're
gonna put it on the table and
talk about it today. And that is
student loan debt. And I'm
excited about my guest because
she is truly an expert in his
area. She has more than 30 years
experience as a lawyer, she
graduated from Stetson Law in
1992. And she actually worked
for Sallie Mae and ECFC or ECFC
and other student loan servicers
before opening her own law firm,
which she did in I think 1995.
Is that correct? Christy? Yeah.
And so she helps her clients
with can deal with consumer
debt, so bankruptcy, student
loan debt, all of the things
that factor into getting out of
debt, managing debt, and really
getting your financial life back
on track. So pristine
archivists, every one of our
events law, she is in South
Tampa. And so I'm really glad
she's here today, because we're
bracing for a hurricane here in
Florida. Welcome, Christy.
Unknown: Thank you. Thank you. I
appreciate the opportunity to be
in it. Yeah. So
Davina Frederick: tell me you
are all Are you all of you said
that you are actually out of the
state today. But I assume your
team is all batten down the
hatches over there in Tampa.
And,
Unknown: you know, yeah, we
closed tomorrow and the next
day, and we've secured our
computers and sandbags for our
doors and things like that. But
I like to joke I evacuated
months ahead of time to Iowa,
where I am now.
Davina Frederick: Very nice. And
yeah, you're in a lovely place.
I'm sitting here looking and
being that fireplace that you
have behind me I really
Unknown: have it on. But you
know, it is getting to the 40s
in the evening now at night,
which is fantastic. I mean, in
Florida, it's always hot. So
that's
Davina Frederick: like yes,
indeed. Yes, indeed, it's a
little you know, we'll have a
little cool here right now. But
as soon as that hurricane blows
through, it's going to take all
the air with it. And probably
not great hair days next week
with. But anyway, let's get on
with today's topic and start out
by hand if I'd gave a very brief
introduction of you, but why
don't you tell us a little bit
more about you, your law firm
and how you help your clients?
Unknown: Sure. Well, when I
graduated 92, it was sort of
during a little bit of a
recession. And so I had worked
for three other or for two other
law firms with three of the law
firms for about a couple of
years before I started my own
firm and one of our clients was
a big student loan guarantor
Sallie Mae USA funds was was a
company back then. And so I did
that work. And that was one
client who I took with me when I
left because the firm I was with
didn't want to have anything to
do with student loans. And so
what we did for it kind of
gradually, gradually increased
to represent a CMC, which is the
guarantor of a lot of the older
loans. And they're the one that
really litigates most of it. So
we ran around the state of
Florida and I tried discharge
cases for student loans in
bankruptcy, in Miami, and
Jacksonville, and Orlando, and
Tampa, and really got my feet
wet then. And then after that, I
went to a boot camp, I guess, or
workshop, you should call it, by
Josh Cohen, up in Connecticut,
to kind of learn some of the
federal programs because, you
know, practicing in bankruptcy,
you really didn't know anything
about the federal program. So
that kind of clued me in on
other options out there. And
then it just continued to grow
from there. And so when I opened
my own practice, I focused on
employment law, which was always
a true love of mine and in
bankruptcy as well. And for your
listeners, the reason I did that
combination, was because
employment law was more attorney
intensive, and it was more
contingency fee, I got paid
larger sums at the end of the
case where bankruptcy was more
covered the day to day, you
know, is up front it covered a
lot of took a lot of staff time
instead of my time. And so it
was a good fit. For my firm. I
think every firm, it's good to
have more than one practice
area. Because something can
happen and it can just wipe out
your practice instantaneous. And
so that was a good fit for a
number of years. And then I just
kind of moved along and back to
student loans. When the market
was ready for that it wasn't
really ready back then. But it's
clearly in the last 10 years.
We've needed some big help with
student loans.
Davina Frederick: Right?
Absolutely. Was there a change
in the law? At some point, or
has it always sort of been this
way, but it just hasn't been a
problem? Because the amount that
people were borrowing was
different. Are there more
standards in place? But? Or was
there a shift someplace that you
sort of like I remember
borrowing as an undergrad, way
back in the day. And
fortunately, I didn't borrow
very much. And, you know, I
don't remember as many people
struggling with student loan
debt in the way that we are
today. So can you give us kind
of a little history, so you
certainly have for 30 years have
probably seen a little bit of
ebb and flow in this area?
Unknown: Well, back when I
graduated law school in 1991.
That was exactly the case, I,
I'm an attorney only because of
my student loans. So I believe
in the program, I think it's
very important to have the
availability of student loans.
But when I graduated, it was a
ratio of one to one. In other
words I owe about what my first
year salary was. And it wasn't
hard for me to pay that loan,
and I paid the loans back in the
10 years or whatnot. And that's
the way it was, you know,
everybody had a 10 year time
period. But now the ratios
aren't one to one. And the
longer you usually have someone
who isn't able to obtain
employment right away, or the
ratios are up to two to one to
eight to one, where they just
really can't repay that. And I
even had a high rate of
interest. You know, when we
graduated in the 80s, and 90s.
From college and law school, the
rates of interest were eight to
8% 12%. mean, that's high, very
high, right? But because the
amount we borrowed was so low,
it wasn't a problem. We're now
you know, with Parent Plus loans
and grab loans, the interest
rates are 6.8 to 8.5. You've got
private loans that are all over
the place, you know, they go up
from like 3%, to 15% and such,
and that ratio is no longer one
to one. So it's not really a
shift in the legal environment
that has gotten to that it's the
tuition costs. And the fact that
people just can't repay those
loans. And so most of our
clients nowadays, you know, they
want to repay what they borrow,
they understand they signed a
contract, they're good with
that, what they can't pay as
they excessiveness, you know
what it's become basically,
because with the cost of
interest with a default, which
basically adds 25% collection
costs on a federal loan, you end
up with just something that's
unpayable and we get rid of that
excessiveness. And then we try
to do it in a way that's tax
free, or at least with an
understanding of what that
potential tax issue could be.
Davina Frederick: Wow. Yeah,
I've heard so many stories from
women law firm owners who are,
by the time they they're out on
their own and opening their own
practice, they have six figures
in debt, and, and multiple, six
figures. So quarter million
dollars is kind of a common
amount that I hear. I've heard
up $350,000, the most I ever
heard was $650,000 in student
loans, because she had gotten
multiple degrees and change
careers, and things like that.
And a lot of women law firm
owners, when they go out and
start their own business,
they're doing it as solos, and
they're lucky, you know, they're
making $50,000, the first year
in just revenue, like it's so
it's not even, it doesn't the
math doesn't even make sense.
And that's if they choose to
start their own business. Or if
they feel like they're forced
into starting their own business
because they can't get a job,
which certainly was the case
after the 2008 recession. A lot
of people did that. And also,
even if they do get a job, there
are it depends on the market
they're in because there are a
lot of markets that are paying
those six figure salaries for
associates, it's the top 1% of
the top 1% of law schools,
you're going to get these, I
have a friend whose son recently
graduated from a top law school,
top of his class, and he's going
to have you know, $350,000
salary out of law school for a
fair amount of New York, but
that's a rarity. The majority of
lawyers are out there making
more regular salaries, unlike
what people think they're
making. So there's a real
disconnect, I think and
understanding of what what is
going on with the student loan.
And I think in general, the
public has a real
misunderstanding, because a lot
of people who are my age are
saying, hey, if they didn't
borrow money to go to school,
there's their or they did and
they long ago, paid it back.
They're sitting there looking at
it going, I don't understand I
pay back my loans. How come you
aren't able to pay back your
loans?
Unknown: Right, and we deal with
that with private loans. The
borrower has to have a co
borrower. And so usually that's
a parent or a grandparent, and
like you said, most of those
grandparents and even parents
have paid their own loan back so
they don't get it. But the
problem is, is back then you
could pay for a course with a
summer waitress job. You can't
do that anymore. You know that
part time work while it might
open your eyes as to what you
want to do. Maybe open your
contacts for that working and
externships and things like
that, it doesn't pay much. And
so with the cost of tuition,
it's not really doing that. And
that's one of the things that we
do is we try to get that
grandparent or parent in on the
communications and have them
understand, there's no way for a
borrower to deal with this loan
in a traditional sense. It's
just not a not a possibility,
really. And so when you
mentioned the amounts of debt
that people have, we do have a
lot of attorneys as clients, and
they are usually in the lower
six figures. I think our highest
has been 1,100,000. And yeah, in
history was he was a
neurosurgeon. And he was at the
very end of his career. And what
he had done is he taken out his
own loans, he paid them back.
And he taken out Parent Plus
loans for his three children.
Now, they had their own loans.
So they had a lot of loans that
they used to go through med
school, medical school, but he
had Parent Plus loans, too. And
so with all the years of
forbearance, the balance kept
getting bigger and bigger. And
so when he did make payments, it
never really made much of a
dent. So he, when we did the
math, he probably paid the vast
majority of the principal back,
but he's still owed a million
dollars. And so he came to me
and he was in his early 70s, he
was still working as a
neurosurgeon. And he was afraid
to settle it because he'd have
this giant taxable event. And he
was worried he couldn't keep
working, because he was afraid
he might commit malpractice one
day. And so we use what we call
this total and permanent
disability program. And we were
able to get rid of the loans in
about I think it was about eight
months or so. And, you know,
that let him basically in his
career, and enjoy retirement
where he was stuck, he was
really stuck where he was when
he first reached out to us. So
1,000,001 is my record.
Davina Frederick: Yeah, well,
and I'm glad that you shared
that story in particular,
because I think a lot of people
tend to think of student loans
as being okay, these are this is
Gen, z and millennials, right,
they're thinking that are having
this problem with honors, you
know, why they don't work. And
you know, and of course, those
of us who are actually boots on
the ground talking to people all
the time about this, we
understand that, you know, we're
talking people in their 30s and
40s. And, and on up, the article
I just posted that was discussed
recently on Facebook, are people
in their 60s and 70s, and their
parents, grandparents, who co
signed on loans who were helping
out their their kids, and really
not able to retire. But I, I'm
really concerned about this
group kind of in their 30s and
40s. Because in addition to
their own loans, they're getting
married, and they're marrying
somebody else's debt. So that's
another way debt can really
spiral out of control, you've
got your debt, they've got their
debt, you're paying these
really, you know, high interest
rates, the it was an a
ridiculous amount to begin with,
and, and then they are putting
it all together and going, oh,
gosh, how do we? How do we deal
with this? It delays buying a
house delay starting a family,
it delays, all those things that
impact the economy? Are you
seeing a lot of couples kind of
come in and say, hey, you know,
what can we do about this?
Unknown: Oh, well, we've seen
folks that say, I'm scared to
get married, and they just put
the decision off. So we
generally won't have a couple
that comes in to talk about each
of their loans, we'll have
someone that just avoids
marriage because of that, and
that's yeah.
Davina Frederick: Wow. And that
it wouldn't wouldn't wouldn't
have a big impact that has on
somebody's life, to make the
decision to not get married or
not get that much involved. Some
because you're worried about the
amount of money or you don't
want to marry into somebody
who's also got the same amount
of money married to somebody, or
you're maybe ashamed or
embarrassed about it. Do you
deal with a lot of sort of shame
and embarrassment for people,
especially highly educated
people? All right.
Unknown: Um, well, yes. I mean,
many of our clients are
attorneys, we did a seminar
recently for the Florida Bar on
student loans, a couple of them,
actually. And it had the highest
attendance because, you know,
attorneys have a lot of debt.
And they're ashamed of it, yes.
But they really are talking with
me trying to find a solution.
They don't look to me as more of
a counselor, they're looking to
me more of a problem solver. So
our conversation just goes in
that direction. Many times they
don't want their parents credit
affected if they've cosign
something. So we're trying to,
you know, make sure that that
doesn't happen. We're focusing
on certain loans in a certain
order to avoid that. Because
they don't want their problem to
become their family's problem.
We do
Davina Frederick: see that
right, right, for sure.
Unknown: But for people that
want to build their wealth, they
really need to have an ownership
interest in their firm and maybe
get out and start their own firm
and student loan debt is causing
them to not do that or feel that
they can't do that. And that's
where the problem, I think,
really stem so I'm very happy
about some of the new progress
the Department of Ed has made
this year. We had identified
just so many problems over the
last few years. And I think What
they're doing is plugging a lot
of those holes. And we'll get to
some of that later here. Yeah.
For people in the future, I
think,
Davina Frederick: before we get
into kind of some of these
solutions, I do want to talk and
I think a lot of people if they
have student loan debt, they're
sort of aware of this. But
bankruptcy freshstart Bankruptcy
is a, you know, has always been
something that's been a solution
in the United States for so that
we don't go to debtors prison,
people can get that fresh start
and start over. But student
loans have been an exception to
that. Can you tell us why that
is?
Unknown: Sure. in student loans,
we have a test called the Bruner
standard. And it originated back
in I think it was 1987. And it
was basically someone who had
tried to discharge their loans
only a few months out of school.
And because of the facts of that
case, the courts came down very
harshly and created this three
prong test that folks can't
meet. And you have to minimize
your expenses, which is not hard
maximize your income, again, not
hard, provide proof of good
faith repayment when you can,
but then that prong of for the
for whatever your circumstances
are, they have to last for the
majority of the repayment
period, that prong is impossible
to prove. You can't prove
nowadays, that in 20 years, you
can't pay back something towards
this loan, you can write a book
you can have, you can have any
kind of you know, getting them
signed, good regular job,
whatever it is. And so we can't
meet that burden, we can't prove
that. And so bankruptcy, it's
known that it fixes a car
problem, you know, fixes a house
problem fixes a credit card
problem, but it really creates
more of a student loan problem.
Because over the past decade or
two decades, what's happened is
folks with student loans, the
Department of Ed puts those
loans in forbearance, people
don't file an emissary to try to
get rid of the loans because
it's very hard to meet that
Brunner standard that I talked
about. And so the loans just
continue to ride to the
bankruptcy unaffected accruing
interest. So if you might have
50,000, when you start, you have
100,000. When you get out, then
you have a few years of no
contact and another 50,000. And,
and so we brought that to the
attention of our judges in the
middle district here in Tampa.
And we also combine that with an
inspector general's report that
showed that servicers gave
improper advice 62% of the time,
whatever it is that they were
doing, whether they're
calculating the interest putting
someone in a program, they did
it wrong 62% of the time, and
you know, if I were wrong 62% of
the time, I'd be disbarred. I
mean, you
Davina Frederick: lose your
license, for sure. For sure.
Well, that's a whole nother,
that's a whole nother episode
of, you know, let's talk about
banks and lenders. Because that
whole industry needs to be
reformed.
Unknown: And so we were
instrumental in helping the
middle district judges recognize
that they can't just rely on the
servicers. And there's this
problem out there of this
continuing debt that's getting
bigger and bigger, and
bankruptcy attorneys weren't
talking about it, because it
didn't understand student loans,
you know, a few years back. And
so our district started a new
program called Student Loan
management program. And it's
been copied around the nation a
little bit, and it's growing
momentum. And so what it does is
it allows someone to get the
benefits that a borrower would
normally have in bankruptcy that
they didn't get over the past
few years. And so that's been
helpful. But then Congress does
have a bill that's before them,
called the Fresh Start act,
coincidentally, where if it
passes or some, you know, some
combination of factors does
pass, it would have a 10 year
period where people who had been
trying to repay for 10 years and
could show that would have an
automatic discharge, because
then they didn't have to bring
an adversary and things. So that
may pass. I mean, there's been
attempts over the past few years
to try to get that passed. Right
now with all the forgiveness is
occurring. Congress is kind of
taking a step back, they're
starting to vote against things.
So I give that less of a chance
of success now than I might have
a few months ago. Yeah, but you
just never know. I mean, you
never know with Congress.
Davina Frederick: Right? Right.
And there's also a big
distinction between federal
loans and private loans. And I
think a lot of times it can be
confusing for people to know
what type of loan they have.
Because as you're going through
as you're going through school,
and you may have oh, you know,
this opportunity to consolidate
these loans and you think it's
still a federal loan and then
you find out later that it's a
private loan. I do think there's
a lot of it's it's a complex
thing to understand what's
really happening if you're not,
you know, an economist, you're
not a bank or not literate. And
even if you are apparently
you're having trouble
Understanding at least 62% of
them are. Because I see that
I've seen that a lot too, where
people think I have, I have a
federal loan, I'm going to
benefit from this, you know,
recent act, and then they look
at their loans and they go, Wait
a minute. Now my servicer is
telling me no, I have this class
of loan, not that class of loan,
which means at some point, it
was consolidated. And when that
happened, it, they took it out
of federal status, so I now no
longer benefit from it. Those
kind of how much do you see
those kinds of complications?
And are there more things you
could do in terms of bankruptcy?
If you have private loans?
versus federal loans? Or how do
we how does all that sort of
play out depending on what type
of loan you have?
Unknown: Okay, um, I see that
problem every day, pretty much
with the different types of
loans. And part of the problem
is, even the federal system is a
little bit confusing. For one,
it's not transparent. So it's
very hard for someone to figure
out what they have. lately,
there's been more information
put up on student aid.gov, which
is a government site that folks
can see. But part of the problem
is servicers are talking about
these older federal loans as
being a private loan. And
they're really not, they're
privately held, and they may
have been privately originated,
but they're actually a federal
loan, that they're only
guaranteed by the government.
They're not actually owned, or
created by the government. So
therefore, they're not covered
by the Cares Act. The Cares Act
is what was passed at the
beginning of COVID. That allowed
for zero interest, zero
payments, and so forth. So we
have a lot of folks who, during
COVID, they haven't really known
what they've had, and they
haven't been able to consolidate
to change their loan type, which
is one of the things that you
can do. And a lot of folks don't
know to do that. So we do see
that problem all the time. With
bankruptcy, the second part of
your question about, can you get
rid of private loans in
bankruptcy, that is one of our
great successes. In the past few
years, there have been some
cases around the nation and, and
some of ours have been up in the
forefront about discharging
private loans that are actually
not student loans or not
qualified education loans. Maybe
someone went to a Caribbean
medical school, they Oh, there's
a ton of Caribbean medical
schools, I once looked it up,
and there's like 50 schools out
there, wow, three of them are
eligible for federal aid. Most
of the rests are funded by
family money, you know, someone
pays cash, or a private loan,
well, we can discharge the vast
majority of those. And many of
those folks can't pass their
boards, you know, they incur all
this debt, they try to come back
to the US and they can't be
licensed. And so I think that's
a huge benefit for folks to be
able to level the playing field
to get rid of those loans,
potentially, because they're not
qualified. There's other reasons
to have a non qualified
education loans. I won't get
into it today. But there's,
there's about seven, eight
different reasons. And so just
yesterday, for instance, we have
one that was filed out of state
with CO counsel. And we have
three defendants, one of which
just agreed to a stipulation of
discharge of their private
student loan debt. And then
we're going to wait and see what
the results are for the other
two. So we can basically argue
things for private loans to get
them discharged in bankruptcy
that we can't with federal
loans.
Davina Frederick: Wow, wow.
Yeah. And I do think there's a
lot of misinformation that's
being used, go to your servicer,
and you try to get information.
It's not really always reliable
information that you may be
getting, right.
Unknown: Yeah, in one of the
ways we actually ask our clients
to back check that you call
their servicer four or five
times, they're likely to get
three or four answers. One of
them might be right, but which
one.
Davina Frederick: And that's
where you get to do some
digging. So let's talk about
some of the kind of solutions
for people that you're able to
you guys are able to bring about
and help with. And we can start
with kind of things that are
traditionally have been on the
table, or we can talk about sort
of the stuff that's been
happening in the last year?
Unknown: Well, probably let's
focus on some of the things that
have been happening in the last
year. Because that's where
people have the biggest
questions is all these changes
they're hearing about in the
news? How does it benefit me.
And so I think that's where
their focus is. So first of all,
that 10,000 Forgiveness, that's
what we hear a lot about, that's
not very much money. It could
help some of the lower income
folks, because it would remove
the default that might be on the
loans currently. But we're more
focused on the Department of EDs
attempts to punch the holes, you
know, fix the problems that
they've gotten the other
programs, and there'll be a lot
more forgiveness with those
fixes than there will with the
10,000 thing.
Davina Frederick: Wow, really.
So give me some idea what that
what, what that would look like,
all kinds of things. Are you
guys fighting for?
Unknown: Sure. Well, the first
thing is if you have any folks
that are in public service, or
have any relatives who are in
public service, that's the
biggest fix. It's basically the
Public Service waiver, which is
going to count old payments. on
old loans, whether they're the
wrong type of loans, wrong type
of payment, any kind of problem
that they've had, usually it can
be fixed with this waiver
program. But it's important that
they do two things before
October 31. One is make sure
that they consolidate any of
their older federal loans, which
are called fel loans FF E L, it
stands for Federal Family
Education Loan, but they're
called fell or if they
consolidate those two direct
loans, there'll be eligible for
that program. If they don't do
that before October 31, then
it's going to go right back to
the old way where people who've
been working public service
expecting the forgiveness in 10
years, or only told that up, you
got the wrong loan type, you
were never eligible eligible to
begin with, that was a huge
problem. And it's gonna go back
to being the same problem after
this one year is over, and the
one year is almost over. Now it
ends October 31. So they need to
direct, they also need to file a
public service. Certification,
basically, you take a form to
your employer, they fill it out
saying your full time you work
for qualified entity, and then
you send it into mohila, who's
the new public service servicer,
that's fixing a huge problem.
And, you know, importantly,
there was an attorney I spoke
with a few weeks ago is a good
example of this. This was
someone who makes pretty good
money right now. But they had
been working public service for
the vast majority of their
career. And so their student
loan was huge, because they
thought that it was going to be
forgiven at the end of their
public service. And it wasn't,
but they now have their head in
the sand because they were so
sick of the whole student loan
program, the whole problem,
their loans were 300, some 1000,
they were a little older. And it
might have even been more than
that I can't remember the exact
number. But we went through
their circumstances and found
out that they're going to be
eligible for this waiver, they
just need to make sure that they
apply for it and change the loan
type to qualify, he hadn't even
the only reason he reached out
to me was because a friend of
his demanded that they call me.
You know, because we'd help the
friend and he did. And so we
were able to suggest to him
during the consultation what to
do. And, you know, that's one of
the advantages of having a
consultation is that you can
either, you know, learn how to
fix it yourself. And know
exactly, you know, you're
hearing from an advocate on your
side as to what you should do.
Or you can hire that person, and
then they can go and fix it for
you. But that public service
waiver program, he didn't have
to go back to work for the
public service. A lot of folks
still today, think that well,
that waiver program isn't for
me, because I no longer work in
public service, maybe I did in
the 90s or 2000s. But not
anymore. You don't have to go
back. One of the provisions of
the waivers you you don't have
to be working there. But the
regular program requires you to
still be working for the
nonprofits. So these fixes in
the last year, have limited
durations and public service is
one of them. The second one is,
folks, during the past decade or
so, they've been told if they
call their servicer and say oh,
you know, I've got a problem
making my payment. I, you know,
I've had this and that problem
this month. Instead of putting
them on an income driven plan,
which is kind of what we do for
someone who doesn't make enough
money to repay their student
loans and maintain a standard of
living. They just put them on
forbearance instead. And
forbearance is basically an easy
fix. It's a way that someone
cannot make a payment. It's also
a way to get them off the phone
faster. And so since servicers
have been accused of paying
incentives to their customer
service reps for short call
durations, well, how do you get
someone off the phone, you don't
tell them about all these
different things they can do,
you just give them forbearance.
And so it's been a long problem,
long standing problem, you have
a loan that's been 50,000.
That's now 150,000. And so the
IDR waiver and audit program
that was announced in April
requires someone to consolidate
their loans to direct loans by
the end of this year. So this
deadline is December 31. So it's
instead of October 31, is
December 31. And it allows for
someone to get credit for those
long forbearances that they
might have had. And that credit
then can be applied towards
forgiveness.
The other thing that's coming
out is a new income driven plan.
So we have some folks who they
make pretty good income, right?
They're owners of their firm, or
they work somewhere where
they're, you know, at the top
higher level, and they're making
six figures, but they might help
care for their parents or they
might have some, you know,
expenses that are high. One of
the problems with the current
income driven plans is that it's
a percentage of that income, and
it doesn't take into account
specialize expenses, no matter
how legitimate they might be.
And so the payment is too high.
So they end up defaulting Well,
there's a new income driven plan
coming out in July, that's going
to be 5% of someone's income,
discretionary earnings, and then
they're using a more more broad
test for expenses. So I think
that's going to fix one of those
last holes that we have, which
is folks that have, you know,
high expenses can't make an
income driven plan. They're
going to be able to do that now.
There's some other fixes with
respect to just overall things
like the accrual of interest,
the capitalization of interest,
there's some internal fixes that
are going to make it so the
balances don't get so high.
Because remember where I
mentioned that folks come to us,
they generally understand that
they've signed a contract, and
they owe the money. They just
can't handle all the excessive
craziness that's going on. And
that's where
Davina Frederick: I mean, it is,
it is insane when you hear
people say, I have already paid
off the amount that I borrowed,
and I still owe $300,000. And
that's me. It's just sickening.
It's sickening. I wanted to go
back, you mentioned something
about forbearance. And I just
want to I think a lot of times
people bury their head in the
sand about this, and they don't
really think about. So you talk
to a servicer and they go, I'm
at a point where I can't pay my
loan, you know, whatever
circumstances happen, I can't
pay any more. And they say,
Okay, well, let's just put you
in forbearance, or let's do
deferment, or let's do. And
let's talk a little bit about
the constant the financial
consequence of that. Because
I've seen that happen over and
over again. And people are later
on years later, they're like
going, Oh, my God, what did I
do? When they go to try to buy a
house? When they go to try to do
something, they start to see the
consequences of that. Can you
talk a little bit about that,
and sort of what the
consequences are of doing those
things?
Unknown: Sure. So the servicers
really haven't been given caps
on someone's ability to use
forbearance. And it's just gone
on for years. And so what
happens when someone goes on
forbearance, they don't have a
payment, but the interest still
accrues. And at the end of the
forbearance period, which is
usually a year that interest,
then it tacks on to the original
principal balance, and it has a
compounding effect. So now
they're paying interest on
interest. It's not simple
interest. It's that compound
effect. And so just like Warren
Buffett, where if you spent if
you save, I think $50 a week, at
age, whatever, by the time
you're 65, you have a million
dollars kind of thing. It works
in the exact opposite for
someone with a student loan. And
then with all the scams going
on, you have folks that
accidentally default, they don't
realize that, oh, this new
company has my loans, they're
the servicer, they ignore them,
then they accidentally default
they add 25% of the balance. So
you have that accrual of
interest, you have an accidental
default, and you have that going
on for years, pretty soon you
have an enormous amount of money
to repay. The other thing about
buying a home is that mortgage
underwriters have traditionally
if someone's on forbearance,
they count their student loan
payment, if they were making it
as 1% of the overall balance. So
that means someone who has a
$300,000 loan, if they went to
apply for a mortgage, the
underwriter is going to assume
they have a $3,000 student loan
payment. Well, that means
they're not going to be able to
afford that house probably. And
so that's the harm that
forbearance has. And if someone
defaults, then they go on
cavers, which is the mortgage
underwriting default system that
they can track that. So
forbearance. Well, it sounds
like an immediate fix, there's
no paperwork required, you can
get no payment very quickly.
It's a trap. It really is. It
should be used only for someone
for a short term problem, like a
car accident where they're
unable to work for a period of
time, it should never be a long
term solution. It's not a
solution of any kind. But this
audit program is designed to
give a one year credit towards
folks who have a direct loan.
And remember, you can
consolidate an older loan to be
a direct loan. And to kind of
get credit for those long term
forbearances. There's certain
things that they look for it has
to be cumulative more than three
years or consecutive more than a
year. But you know, you can use
that in combination with public
service. So we have folks that
are contacting us that can get
an immediate forgiveness without
doing anything further other
than the paperwork to get these
things. And some of the things
are automatic. Some of it
requires paperwork, like even
the $10,000 thing. That seems
simple, right? But there's an
income cap, which means only
those that make less than
125,000 or 250. Married will get
it and only those with loans
that are held by the Department
of Ed. So you still have to take
some action, you have to let the
Department of Ed know how much
your income is. Well, during
COVID. No one had to do that.
Right. So they don't know. So
there's going to be this
application out around the first
part of October that people can
we don't know what the
application is going to say yet.
But I mentioned one of the first
things is going to be what's
your income, and they're looking
at the 2020 and 2021 period. And
you're going to want to drop
that basically, to be eligible
for that. And it's 20,000 of
someone has a Pell Grant. And
Pell Grants are something that's
not understood a lot. People
think well how is the 10,000 or
20,000 applied to my Pell Grant?
Well, you don't repay a Pell
Grant. It's a grant. It's just a
way for the government to track
its lower income folks. And so
that's why if someone had gotten
a Pell Grant, that usually meant
that their family was lower
income, they qualified for that
grant, and now they'll get a
$20,000 instead But there's
things you have to do, you have
to file the application. If you
had paid during COVID, you can
file something to add to ask for
a refund, even if you'd
refinance your loans. And here's
one of the lesser known things.
If you'd refinanced your loan
during COVID, that's payment by
a third party, that is something
that you can get a refund for up
to the 10, or possibly 20,000,
if you ask for it in a certain
way. So some things are
automatic, and some things you
have to take a few steps to get.
Davina Frederick: Wow. So if
you're sitting there with your
multi six figure alones, and
you're just you feel defeated,
because it all of this stuff is
just more confusing than ever.
Let's talk about some resources
for people obviously, the the if
you the biggest resource is go
hire an attorney who specializes
in student loans. Because that,
you know, that just that just
makes sense. If you're sitting
on six figures, well, even not
in I didn't didn't good enough
to be six figures, because I
know people who've been, you
know, had five figure loans, and
it's taken years and years and
years to pay them off. So seeing
an attorney, but let's talk
about some of the things that
you have available, because I
know you have a wonderful, first
of all, you've taught many CLTs
on this, and you have a
wonderful YouTube channel. So
tell us a little bit about that.
Unknown: Sure. So we have a
YouTube channel that I call the
student loan sidebar. And we
created that, because videos
seem to be where people want to
get a lot of information, they
can do it in between
appointments and such. The name
originated from a publication
that we do a column in our local
bankruptcy, cram down
newsletter. And so for that we
provided in writing the
different things that they
should be aware of for their
clients or for their own loans
each quarter. And that's
available on our homepage of our
website, which is Christie
archivists.com. And so you can
go to the cram down sidebar and
read what you like, or the
videos of if you just Google
archivists law, YouTube comes
right up. And so we try to do
videos that are somewhere
between two and 10 minutes to
talk about whatever recent
announcement, how someone can
qualify when their loans are
eligible. And if there's
anything they need to do. And
the reason why I do that is
because if you see that
something's passed, or about to
pass, sometimes the title of the
article might be more clickbait
than anything. And you remember
getting into an argument with
one woman who was a nurse. And
she was absolutely convinced
that this public service waiver
thing was going to get rid of
her loans entirely. But there
were some reasons why she was
partially eligible and not
completely. And she didn't know
that, you know, from the
article, the newscaster had just
covered just the generic kind of
top line specifics. And so with
the YouTube channel, we try to
get into those specifics just a
little bit more, but they're
still easy to understand. And,
and so that's free information
that folks can go on and see. We
also give seminars for the
Florida Bar and some other
things, some podcasts and such
about different topics that
might include the joint spousal
consolidation act, that's going
to be our next video, the House
has passed it, the Senate has
passed it, President Biden is
expected to sign it probably
within the next two weeks, and
is to allow those who went to
school and later got married,
those folks consolidated their
loans. And the problem with that
is that they can't and
consolidate. And they, they
consolidated into an older loan
type. And what happens is
they're trapped in that program,
it's kind of a one way in no way
out kind of situation. And so
they're not eligible for any of
this new stuff. And so this fix
is basically to unwind that, and
that's been a beef of ours for a
number of years. And we've
obtained the similar results in
bankruptcy through an adversary
proceeding. But now people can
get it much, much cheaper and
much faster with this law change
that we expect. So we'll do a
video on that. Our videos
usually come out a few days
after the announcement or maybe
a day or two, just so we have
enough time to digest it. Yeah,
think about while
Davina Frederick: I'm sure it's
I'm sure there are people who
are gonna go now go there now
and just binge we'll include the
link in the show notes. So if
people continue that, maybe what
if you're in Florida and you're
getting through the hurricane
and you're hunkering down? Maybe
we binging on Chris right, maybe
Unknown: binging videos. And
then we have a lot of folks who
they're okay with the videos,
but they want to know exactly
what you know what to do with
their loans. And it's a time
versus money thing. You know, if
if, if our consultation fee
isn't that much for the amount
of money they owe, they might
want to have us do a one on one
consultation just to see if we
can do what they need to do and
what we can do for them. And so
for that we waive our fee if if
they hire us and then number
two, sometimes we can tell them
what they need to do in that
half hour hour. And then they
can do it themselves. Most
eliminate our clients or
attorneys and they're able to do
that. And then three if we just
spend five minutes and we find
that they're doing everything
that they can and do then we
don't end up charging them. So
that's what we call as our
consultation guarantee, we do
charge for every consultation,
we used to do them for free. We
stopped that a number of years
ago, we really can't afford to
do that. But I think it's a
valuable piece of information.
It's not much money. And
unfortunately, the amount of
these loans, it's often the
price of a house, you know,
they're dealing with a large
student loan. And these fixes
are going to go away, you know
that. That deadline I mentioned
of October 31, December 31. Once
those deadlines pass, it's going
to go to the old way, the old
system, because the reason these
fixes are in place, is because
the current administration has
used this heroes act to
basically say there's a public
emergency and we can do this.
And that might raise a question
with some of our attorneys is
that what is legal, you know,
how much of this is legal that
they're doing? Well, you know,
it's questionable, because now
we have President Biden saying
that there's no pandemic, the
pandemic is over, well, is the
state of emergency still here
then to effectuate some of these
changes. So I encourage people
to get in there and get these
changes done. Get that
forgiveness, because it's
impossible to unwind that, but
there's a very strong
possibility of some of these
things going away earlier than
anticipated if the support is
not behind them. And then you'll
have two classes of folks,
you'll have folks that have
already gotten the relief, that
forgiveness, you'll have other
ones that are pending that may
or may not get it, because
there's years of litigation over
whether or not it was legal for
the administration to do this
via Executive Order versus an
act of Congress. So, you know,
that's a whole nother topic.
Davina Frederick: Right? So this
is really one of those
situations where, if this has
been in the back of your mind,
now it's time to bring it to the
forefront and make an
appointment with an attorney who
handles student loans to really
see what your options are. And,
and for me, I mean, not you, you
always hear me advising my
clients don't do don't DIY
through the years I have, I have
hired so many lawyers who had
specialized in different areas
of practice, yes, I could go
figure things out, yes, I could
research. But when time is of
the essence, you really want to
make sure and in something as
complicated as this, I do think
you it is really would behoove
people to go talk to somebody
that this is what they do all
day, every day, because they're
going to know a lot of these
nuances. And a lot of these
things just proceeds just
dropped our absolute wealth of
information here. And it's you
might have a listen to this two
or three times to really
understand the full impact of
all of it. So I do think that's
important. Let me ask you this,
do you is the student loan since
then you're dealing with federal
loans and things like that? Is
this something where you help
people in other states? Or is
this? Are you limited to
Florida?
Unknown: For state for private
loans, we limit ourselves to
Florida unless we have co
counsel that works with us,
which we do in those private
discharge cases? For federal
loans, we can do things
nationwide, generally. And so
one of our more successful
programs is that disability
program, where if someone can't
work full time doing what they
used to do, we have an
occupational medicine specialist
that works with us, and we
typically can get discharges. So
that would be Nationwide there.
So a little bit of both,
basically,
Davina Frederick: yeah, I have a
I really have no one person I
went to law school with who had
a, who actually had she had a
very serious disability that did
not allow her to practice law,
certainly after she graduated.
And it took her years to get
that resolved. But fortunately,
she was able to. And I have
another friend that I graduated
from law school with you. By the
time she was done, she owed
about $350,000. And she started
a nonprofit. She says I started
nonprofit, if I work a certain
amount in this nonprofit, then
I'm eligible for I guess that
public service.
Unknown: Yeah, tenure. So if you
have 10 years of working for a
qualified nonprofit, then you
would be forgiven of the
remaining balance. And that was
also tax free.
Davina Frederick: Yeah. So there
are those, that is a very
creative solution that a lot of
people probably wouldn't think
about. And so I think that's
where there's also a benefit to
talking with an attorney who
kind of specializes in this
area, because there are, there's
a lot of creative solutions to
get. And I think you have to be
you have to pull out all of the
all the stops in trying to be
creative and figuring these
things out. Because I think that
this, I think this system was
built deliberately to be kind of
a quagmire, because the banks
and lenders, they're making
money. They're making a lot of
money on this because even
because so many people are
attempting to pay and they're
paying years and years of
interest, even ones who
eventually may have something in
forbearance or default on it or
whatever.
Unknown: Well, one of our
primary arguments for
discharging private loans is
actually kind of like that. It's
a pretty A Tory type of
situation, we're in 2005. And
six, the Bankruptcy Code was
amended to basically give
protection to private loans
similar to federal student
loans. And so there's a lot of
private lenders out there that
sent out marketing material and
said, you know, do this do that,
you know, buy a car or do
whatever it is you with your
money, we have this for you. And
they wanted to basically have
their funds be counted as a
student loan. And they were
really nothing more than a
consumer loan, they had a high
rate of interest, they had a co
borrower. But since they were
considered a student loan, they
were non dischargeable. And in
fact, that's where some of the
recent case law has come out to
say that it's not dischargeable.
I'm not that sorry, not non
dischargeable. There's too many
negatives, but
Davina Frederick: but it could
be dischargeable. Yeah, it could
Unknown: be dischargeable. And
so there's a lot of, you know,
help in that area. So, but the
transparency of the system is
horrible. I've done multiple
areas of law throughout my 30
year practice. And I have to say
that student loans is the most
confusing out there. Right now,
there's contradictory
information out there, because
we have the old programs, then
we have the new fixes that are
temporary, usually lasting
within a few months or a few or
a year here, then it's gonna go
back to the old program. So we
have folks who believe that they
shouldn't consolidate now,
because none of their earlier
payments will count. Well, under
these fixes, there's a one time
waiver where it will count. But
the old information is still out
there. And it will be accurate
again, come next year. And so
that's
Davina Frederick: I don't Can I
count on your servicer to give
you accurate information. So I
think one of the things that's
really complicated this process,
a lot of we saw this in the I
represented lenders in
foreclosure in the early in
around the recession, so 2007,
eight, all those years there.
And so much of the complexity of
that you see in here is passing
is those loans getting sold. So
your servicer, hat changes over
time to and as these change,
that also can have an impact on
what you're seeing and
understanding and believing all
of that as well, because you may
not be getting accurate
information, if something has
been sold several times a lot
can happen in the process of
something being sold and how
things are categorized or
whatever. So it's really
important to, you know, dig deep
and understand it and get help
doing that.
Unknown: You also have, you also
have a bit of a deer in the
headlights. Now, I once wanted
to change my billing program.
But with all the different
options out there, there were
advantages and disadvantages.
And so I just didn't make a
decision, I had too much
information. And so that's how
to where it's just too much
information, folks will look at
it, they don't have time, they
don't want to get back to it.
And then they don't make a
decision, which is a decision in
and of itself to remain exactly
the same. So yeah.
Davina Frederick: I think that's
a wonderful point, I cannot
stress enough how this decision,
if your goal is to be wealthy,
and live a rich life, this
decision, you may think I can
ignore this right now and just
do whatever, and I'm just not
gonna deal with it. But one day,
something is going to happen,
that's going to force you to
have to deal with it, and it's
probably not gonna be pretty. So
now, if this is something you've
been hiding from, and burying
your head in the sand over, now
is the time and don't. Don't try
to do it yourself. If it feels
overwhelming, go get somebody
who, who knows what they're
talking about who does this for
a living who is not overwhelmed
by it, because it's not their
personal thing. And ask them to
help and pay them to help you
and and you'll wind up saving
just 1000s and 1000s and 1000s
in the long run most likely. So
Unknown: and I want to mention
one other thing. Anyone who has
not paid on a private loan, if
you do his settlement on any
remaining balance. First of all,
there's a lot of things you
should look at to see whether
it's dischargeable. But once
you're done with that, if you do
settle it before the end of
2025, the result would be tax
free. So if you get a settlement
where you're paying 40 cents on
the dollar, or something like
that 60% has been waived. You
don't get a tax bill on the rest
of that if you can get it done
before December 31 of 2020
Thought so it's a few years down
the road, but it's only around
the corner, basically with a
settlement. Yeah, so the reason,
the reason I reached out to
offer this information on
student loans is because
minimizing those personal
expenses is huge towards
building your wealth. But
minimizing firm expenses is
important too. And so one of the
things I've done with my office
is we've gone remote, yes, it's
March of 2020. We went ahead and
went remote and we decided we
like it, and we're gonna keep it
up. We still have our office for
when we need it. And so we're
offering our office as
workspaces for those attorneys
who you're working at home to
you're in Tampa, maybe you And
so, but you only need an office
on a sometimes basis. So we have
it is sound tamper workspaces.
If anyone out there wants to
reach out to us, I'd be, I'd
love to have a chance to talk
with them to
Davina Frederick: wonderful. I
think there are a lot of people
out there who are looking for
those kinds of solutions right
now where they really don't need
an office on a regular basis.
But they like to have that place
where they can meet clients if
they need to do that. And zoom
doesn't work for them anymore.
Or even just yeah, the house and
goes to play some work because I
know a lot of people have little
kids at home. And even if they
have a dedicated workspace, they
may want that, that place they
can do that. So wonderful,
wonderful their resource there
in South Tampa. So we need to
end but tell us how people can
get in touch with you bet your
YouTube channel but tell us
other ways they can get in touch
with you if they want to.
Unknown: So our email is info at
Christie markiewicz.com. And our
phone number is 813-258-2808.
And then if you go on our
website, there's of course the
contact me forms, we have a blog
also that I pretty regularly
publish things that have come
out. And then the YouTube
channel is our coverage law.
YouTube comes right up.
Davina Frederick: Wonderful,
wonderful. Thank you so much for
being here, Christy. I think
this has been hugely helpful.
And a lot of people hopefully
will take this to heart and
really take action on dealing
with these student loans. I know
the temptation for people is to
just not think about it. But
really, truly if you want to
build the kind of wealth that
you say you want, then this is
something that does have to be
handled, because this can take
everything away. Really, it can
have that kind of impact on
somebody's life. So as as the
case when you mentioned your 70
year old client, I mean, you
know, this is this is no joke
these student loans. So and we
see that the government is going
to be you know, a limited
resource and how they help us
get out of this. So do reach out
to a lawyer if you're in
Florida, reach out to Christie
for sure. And thanks so much for
being here. Christy. I so
appreciate it. I've enjoyed our
conversation.
Unknown: Oh, thank you very
much. I appreciate the
opportunity and your podcasts
are wonderful. By the way. I've
listened to a few others over
the years and have really
learned some things that have
helped me in my practice. So
thank you, thank
Davina Frederick: you. I
appreciate that.
