Identity theft is sometimes a problem with family members and roommates. People will be surprised how close to home this can happen and what you can do about it.
We talk about how student loan debt breaks families apart.
And we wind up talking about new rules that allow for some additional student loans to be forgiven tax-free, at least for the new few years.
To reach Damon go to DamonDay.com.
Transcript
Intro (00:00):
Welcome to the debt-free dudes podcast with Damon Day. If you want someone to blame for this podcast, track down Damon through his website, damondayy.com. Damon is an exceptional debt coach advisor and a trusted resource that helps save good people from bad debt.
Steve (00:19):
You’re listening to the very first Damon Day podcast. Obviously the chuckle on the other end, there is a that’s Damon day. My name’s Steve, and this is the premier podcast. So we’ve got to start with the basics. Damon, what is the name of your podcast?
Damon Day (00:35):
The name of my podcast is debt-free dudes.
Steve (00:39):
Okay. All right. We can go with that. So what’s my wife thought of it. Well, then it’s awesome. It’s excellent. If you had thought about it, it would have been followed by what the hell were you thinking? Yeah, exactly. But she thought about it. So we’re going to stay with that. So what, what’s your intro that you, uh, just hurriedly wrote for the show?
Damon Day (01:02):
So I just scribbled down some, some notes. I think I’ve got a great intro. All right. And my best radio voice here is the, the intro for the show. You and teaching people how to get out of it. My name is Damon day. The soon to be obvious brains behind this dynamic duo along with my cohost Steve , who’s mainly here for the much needed comic relief. Today. We were
Steve (01:55):
Ready? I am ready. Welcome to the debt-free dude’s first and hopefully not last podcast, just a couple of dudes that know a lot about debt. We are proven and certified experts at getting ourselves into debt. And because of those life experiences, we’ve become kind of a big deal discussing the CARES act, identity theft, and the $1.9 trillion bailout bill that could save you from the taxman. If your loans are ever forgiven, Steve, tell us all a joke to hook the audience in, please. Bernie Sanders said, if you’re a student in debt, you’re not alone. All right, and this might not show, ah, I have the best debts in the world. They’re all outstanding. I
Damon Day (02:14):
Told you comic relief. I’ve been replaced.
Steve (02:17):
I need everyone to wish me luck. I have a meeting at the bank later in the fall. It goes, well, I’ll be out of debt, but I’m so excited. I can barely get my ski mask on. All right. So Damon, let’s start with a serious topic. Let’s talk about family conflict in debt. You know, over the many years that I’ve been helping people with debt, I’ve seen way too many situations where one family member drags another one in whether it’s identity theft or something else, but you had a situation recently that turned out to be a very uncomfortable family dynamic. Can you tell us about it?
Damon Day (02:54):
I wouldn’t say it happens often, but, but more often than it should, where we’ll have situations where a parent will sign up for a loan for the child or, uh, or even vice versa, a child could potentially take out a loan, you know, in the parent’s name. And usually I think it’s done with the consent of both parties at the time. And then over the years, that consent seems to be forgotten, not in every case, but quite often we get questions about, um, you know, something like this. Hey, um, my mom took out a whole bunch of loans in my name. She used the money for God knows what? And I got some of it, but not all of it. How do I get my name off of these loans? Because my mom’s supposed to be responsible.
Steve (03:44):
Yeah. And what’s mom’s general, uh, take on the situation.
Damon Day (03:49):
Well, it depends on the circumstance, but usually, um, you know, mom’s general take on the situation is they’re not her loans. They’re in, you know, the daughter’s name or the son’s name or whatever. So it really becomes an issue because you know, it doesn’t matter who took out the loans, unless you’re literally going to make a fraud claim against your mom or your daughter or whoever. There’s really no way to get yourself taken off the loans. Even if you didn’t use any of that money, it’s no different than being a cosigner.
Steve (04:22):
So that’s a situation I’ve run into a lot over the years, which is, you know what, there’s a perfect solution for this one already exists. We can get your mom, we can get you off these loans. Um, all you gotta do is call the police and file a police report. And, uh, you know, she may end up being criminally charged. Are you willing to do that? And the general answer is no.
Damon Day (04:44):
Yeah. And then usually the response is, well, what other ideas do you have to get me off the loan?
Steve (04:49):
Well, you could, you could pay it. You could file bankruptcy and eliminate your obligation for the loan, right. Or you’d go to your mom and say, mom, can you pay this off for me tomorrow, please? Yeah,
Damon Day (05:03):
But I mean the general rule of thumb for, for anybody that, that may be listening is regardless of who took it out, unless you’re prepared to, like you said, Steve, go to the police, make a fraud claim where it actually was legitimate identity theft, unless you’re prepared to do that. You guys are both married to that loan until it’s resolved.
Steve (05:25):
And I’ve seen this situation also with couples where one partner, uh, will generally manage the bills and the other one might not really know what’s going on. And all of a sudden they get divorced and their name is on this old debt. And it’s now many years later, one of the flip situations I’ve seen. So think about if you’ve seen a different sort of dynamic. One of the flip situations I saw was a woman who told me that her father-in-law gave her permission to go out and get this loan and use name. And he did. That is exactly what he did. Then she got divorced from his son and he denied that he ever did it.
Steve (06:08):
Now, the story actually had a fairly interesting ending because, uh, this turned out to be like four or five years later. And the collectors were coming after her. And she asked them to validate the debt, show me the paperwork and guess what? They couldn’t show paperwork, certain paperwork. And that was the end of that. So, um, you know, identity theft with roommates is another situation where all of a sudden you find yourself, you check your credit report a year later, you find that you’ve got cards that you didn’t, Oh, you didn’t think you owed. And now all of a sudden, um, it traces back to the roommate. Now roommates are more likely to have a police report filed against them.
Damon Day (06:55):
Yeah. That’s your mom. Yeah. Well, you know, my father told me something years and years ago and I’ve always remembered it. Cause it does make sense. And his, his theory, if you will, was, if you ever loan money to family, you need to treat it as a gift, right? We’re going to get, you can make the loan, you can draw it up and there’s a chance you could get it back. But you have to ask yourself, is this worth potentially ruining the relationship? And this is ask yourself this question before you co-sign or before you loan the money. And if you know the person not fulfilling their into the obligation would cause you resentment and animosity, it’s better not to co-sign or not to loan the money. Or you have to be 100% resolved to the fact that, Hey, I’m giving my son a gift.
Damon Day (07:44):
I’m giving my mom a gift and have that in your mind. So if it does go sideways, it was just a gift. And you, you did that act as, as a gift. So it doesn’t ruin that relationship, but, but when you’re co-signing on a loan or you’re letting a son or daughter take out a student loan in your name, it’s the exact same thing. You don’t know what life’s going to throw at you. And that that person could graduate college, not get a job, not be able to take on that loan. And then you’ve got this tension in the relationship and it’s unfortunate, but you know, student loans destroy a lot of things.
Steve (08:18):
Oh, in a lot of ways, you know, people think they’re doing something good for their granddaughter or grandson and they take out a parent plus loan or something like that. And the kid never graduates and never makes payments on the loan. Now grandma’s on the hook. She’s getting ready to retire. Her social security is getting garnished over a federal student loan. And you know, Christmas is not fun for anybody anymore.
Damon Day (08:43):
Yeah. They need to have in that situation of Festivus
Steve (08:46):
For the rest of us, a student loan for us. So I once had a client who was a foreign student studying in the United States and his dad came over to visit him during the summer. Um, and went back home out of the country. Well, about a month after his dad left, he discovered his dad had filled out like 10 credit card applications in his name. There’s a quality father for you.
Damon Day (09:19):
Yeah. Well you can choose your friends, but you can’t choose your parents
Steve (09:22):
Is your family so true. All right. So, um, let’s talk about the dynamic where the mother, uh, takes out a loan in the name of her daughter. And again, a situation I’ve seen many times, um, I don’t know what drives people just over the edge to do that, to screw up the credit of their, their child, who they so dearly love, but then all of a sudden, uh, the father was never aware about the situation. So it starts affecting the daughter, the mother, the father, the relationship, and the collectors are calling. Everything’s going to hell Damon, what the hell do people do in that situation?
Damon Day (10:12):
Well, I I’ve had actually several clients in similar situations. Um, but the first thing I always tell them is if I can catch it in time, cause usually I’ll get the client before it all blows up. Right? So luckily there’s there’s time, but my advice always is coming clean. First is the best thing you can do. Let’s come up with a plan and then come clean to the person who’s in the dark. Whether, you know, you’ve used their name or what the situation is, or, um, you know, you, you got in the situation with your, with your child and you know, your spouse doesn’t know whatever it is. You need to come up with a plan and then you need to sit down and it’s going to be an uncomfortable conversation, but it would be better than that uninformed person, fielding phone calls from debt collectors, and then having to have that conversation.
Steve (11:09):
Yeah. Life’s going to be very chilly for a few days or a week or something like that. But if you have any sort of relationship at all, people generally come together, okay, let’s solve this. Uh, and once everybody is informed and on the same page and pulling together in the same direction, these things work out, um, nobody ever died from a situation like that. There are solutions they’re just not fun to break the seal on.
Damon Day (11:39):
Yeah. And, and a lot of times the situation tends to get worse because of that, that fear of confrontation, if you will, or exposure, however you want to describe it. But because of that, fear tend to let the problem go on and get worse and worse and worse trying, you know, thinking, okay, well next month, I’m going to fix it. I’m going to get this, this other job or I’m going to get this deal. And I’m going to be able to turn the corner on this thing. And I’m going to be able to get this solved without it ever getting away from me. And that just tends to compound and compound and compound until what became a, you know, a $10,000 problem is now a $50,000 problem after several years of trying to get it fixed. Right.
Steve (12:20):
Well, here’s the thing. I would much rather be the unknowing spouse. Who’s a husband or wife says, honey, I got to come clean about something. And you know, I think we can get through this versus either answering a call for a debt collector or having some sort of process server knock on the door, serving a lawsuit. Uh, I, that’s not the surprise I want. Yeah. That would be fun. Dinner.
Damon Day (12:51):
Just waiting for you when you get home is a dish best served cold
Steve (12:56):
For about three weeks. Yeah. I mean, have you, have you seen people, have you had clients who have gotten divorced over their debt? Oh yeah. Okay.
Damon Day (13:07):
Um, it, it, it happens unfortunately, you know, quite a bit, um, you know, I mean money is one of the top reasons for, you know, divorce, no fights over money, disagreements over money. It sits, it’s unfortunate, but you know, that’s part of life, I guess.
Steve (13:25):
Well, on a brighter note, let’s talk about student loans while you are here for the comic relief. Uh, well, you’re not alone. Bernie Sanders said you’re not alone. So some new potential changes, Hey, I didn’t say anything about the quality of, uh, so it’s free, it’s free dudes. So some new potential changes in the money world when it comes to student loans, this under the, uh, rescue America act. So this is the follow on bill to the cares act. Uh, Congress is talking about, well, actually, mostly the Democrats are talking about, uh, passing something that is very needed. It’s this terrible hole that we’ve had where some student loan debt is forgiven and other types of student loan debt are not forgiven and people might have a huge tax bill to pay. And I mean, for example, the certain types of loans that are forgiven right now tax-free are public service loan forgiveness.
Steve (14:34):
You know, if that ever happens, uh, teacher loan, forgiveness, loan, forgiveness, uh, for nurses, doctors, and veterinarians for programs of public interest loans that were forgiven because of death and disability closed school discharges, unpaid refund discharges. And actually I had to go look this up because I was unsure, but borrower defense to repayment is not taxable. The IRS had put out a notice, uh, a year or so ago, so that that’s good to know. But if you had a certain type of loan, uh, like in a income driven repayment program, Damon, the danger was always that the loan was going to be forgiven. And then you were going to get a huge tax bill and people always said, Oh, that’ll never happen.
Damon Day (15:26):
So wait, wait, just back up just a second. So are you saying the three people that got the borrower defense to repayment granted won’t have a tax bill? Correct. Do you happen to know because you know, you’re comic relief. Do you know the, uh, roundabout numbers of people that have actually had a borrower defense repayment claim, uh, successfully, I guess adjudicated is probably the wrong word, but you know, resolved in their favor.
Steve (15:53):
Last time I saw the numbers, I think it was below 200. I mean, it’s, you know, it’s not many at all. There was, there was a group of people, a lot of students that went to, uh, like ITT tech or one of the Everest, uh, one of those schools that got shut down during the Obama years.
Damon Day (16:15):
Yeah. I remember that a lot of people from that school got it done. Yeah. Just kind of blanket got forgiven Corinthian. It was Caribbean
Steve (16:22):
Corinthian was another one. Yes. And then we moved into a new administration and all of a sudden the rules changed, uh, forgiving. These student loans is unfair to everybody. And so that’s where it stopped. I mean, it literally stopped. They didn’t get processed. They sat there and nothing had ever happened. Uh, when they appealed the ruling, they would just get denied. So moving forward, I expect to see the number of people forgiven, ramping up.
Damon Day (16:54):
Yeah. Well they just basically ramped down the staff. Right. There was, I think at one point you said there was like six yeah. Six people try, you know, going through everybody’s claim. And there were how many hundreds of thousands to go through.
Steve (17:09):
It was ridiculous. It was never going to get, it was never going to get processed. So, but borrower defense is a very interesting topic because, um, too nerdy idiots like me, because is it, if a student was actually taken advantage, the school lied, they provided false inducements. They never provided services that they said they would. Um, they were never accredited, you know, just total frauds, uh, should the student later on have that student loan forgiven?
Damon Day (17:45):
What do you think? Well, um, yeah, I mean, when you look in, uh, you know, other areas where fraud occurs, I mean, that seems to be the general societal consensus, if you will, that, you know, and you know, if, if somebody commits fraud against you, should you be obligated for future repayments to the, well, in this case, it wouldn’t be to the entity that committed the fraud. So it gets more complicated. Um, cause you got the government involved in the middle of all of that. So you’ve got the taxpayer argument in there too, but at the same time, you’ve got this 18 year old kid that got sold a bill of goods. So
Steve (18:26):
Yeah. And their financial life gets trashed for the next couple of decades because now they’re on the hook for loans that were never really any good. The problem with student loan issues is that it is so complicated, so much like an onion with so many layers. You know, the problem began before the student ever went to the school or applied to the school. It began with a societal expectation that everybody should go to school. And what’s your, what’s your opinion about that? Should everyone go to college?
Damon Day (18:55):
No. In fact, um, you know, I’ve got a, a 14 year old, a 12 year old and a seven year old. And you know, it’s funny when I was growing up, it was college college, college college. My mom was like, you know, you got to do, you got to go to college. That’s exactly. Um, and now with my kids, my, my 14 year old, uh, you know, about a year ago, he came up to me and says, dad, I don’t, I don’t really think I want to go to college. And I was almost proud. Like I was like, so wheat, he doesn’t want to go to college. And I think, you know, like you said, as a society, we’ve been kinda had this drummed into us, that the only way to be successful is to go to school, get a degree and then go get this great job.
Damon Day (19:37):
But I was actually talking to my twelve-year-old, um, on the way to, uh, baseball practice the other day. Um, and we were talking about, um, this whole idea of just going to school for the sake of going to school is not a very smart thing. You have to approach it. Uh, like you would approach any, any other investment that you might want to look at because we were talking about Bitcoin and somehow it segwayed into whether college was a good investment, but I was explaining, you have to look at it as how much money we you’re going to have to spend to get this degree. What degree are you going to get? You know, what, what are you going to potentially be able to do with this degree and try to assign a value to that piece of paper, if you will, and then determine whether or not that’s a good investment or if your money and time should be spent elsewhere.
Steve (20:25):
So let’s go through the process quickly. So you have a kid he’s in, or she’s in high school, you’ve got the counselor, that’s telling them about going on to college. You have teachers talking about how proud they’re going to be. When they go to school, you got parents saying, you need to go to college, I’m going to pay for it for you. And then they go to college. They tour the campus. The campus is wonderful, but that a disconnect because financial aid at the college, they’re just trying to sell butts into seats. They’re trying to sell students into tuition. It’s a sales process. The student doesn’t even consider what is this field like? What is my income going to be like, what is this degree going to cost me? Am I going to like it? How many people ever finished the program and get their degree? And then before you know, it, you know, they’re, they’re off, uh, either without a degree or heavily in debt, unable to follow their field because they’ve got to pay the bills. But yeah,
Damon Day (21:22):
When you go through that process, who along that path is incentivized to sit down with the student and say, let’s analyze this thing. You know, uh, you, you know, if you come to our college, this degree is not worth it. You know, you can do underwater basket weaving and you can major in that and get really, really good at it. And you can go out and work at Starbucks with that degree, right? So you should pay a hundred thousand dollars to get this degree, but don’t worry. You don’t have to pay it. We’ve got all these resources that we’re going to be able to get some grants over here. And some federal loans over here and some private loans over here and Oh, student loan debt is good debt don’t, you know? Right. So it’s going to be good debt because it’s a good investment, right.
Damon Day (22:00):
And then all this, and you’re 18. You don’t want to be, you know, a, a quote unquote failure. So I mean, who, who stands up and says, Oh, no, college is for dummies. I want to go do something else. And then somebody says, Oh, that’s a very smart decision, Johnny. I mean, I think we’re kind of turning that corner now with all the student loan debacle and all this stuff. I think where we’re at today is, is a lot, uh, better than where we were 20 years ago. If you tried to say, college is not a good option, 20 years ago, you would be looked at like a pariah. But now I think it’s more accepted that, Hey, yeah, wait a minute. You know, I, I like working on cars. I could go to a trade school and I could, you know, get, get some skills and some knowledge and get an apprenticeship somewhere and go out and make 80 to a hundred thousand dollars a year fixing people’s vehicles because there’s a shortage of people that have those kinds of skills, because everybody’s going to this four-year school to get this degree. And now everybody has this degree and there’s not enough jobs for these people that have these degrees, but there’s plenty for people that don’t,
Steve (23:04):
Well, you’ve got the small liberal arts colleges that are closing down. Uh, you have the bigger schools that are canceling their liberal arts degree programs, but to really date myself. So when I went to college four decades ago, uh, there was no student loan. You went to school and you paid each semester in cash. You got the bill, you paid it off, you went to school and you didn’t have to worry about the student loan. You graduated from college, you had no debt. Now, as I remember, right, you graduated from college with no debt as well, didn’t you? I did. And that was because of my daddy. Well, you know, but that made it, so that makes a huge difference because the pattern that I have seen over the last probably 20 years is, uh, and I don’t know why this is so true, but you get, uh, a kid that graduate graduates from college. And for some reason they all want to buy a car, uh, right afterwards. And then the car payment starts and then the student loan payments start. And now, instead of following their passion and whatever the basket weaving, um, they’ve got to go out and get any sort of job to pay the bills and the downhill spiral starts there.
Damon Day (24:20):
Yeah. And let me, let me back up. Cause I was, I was throwing in my joke of that because of my daddy, which was actually true, but to segue into what you were saying, you know, I graduated in 2002 with the business finance degree that wasn’t that long ago, we’re talking two decades ago, not four. Right. And my, my dad is self-employed, he’s got a successful business, but back then 20 years ago, he was still very much middle income. You know, the business hadn’t really taken off yet. He was able to, uh, help me thankfully and afford my tuition. So I was never, uh, never had a situation where I had to go get student loans, but I went to Cal state Fullerton. Right. And I don’t remember exactly, but even on his, you know, middle income, uh, at the time he was able to kind of pay as I went.
Damon Day (25:08):
Um, and if the semester, I think it was, I want to say it was maybe $1,500, maybe $2,000 a semester. It wasn’t like it is today where, you know, it wasn’t like he was writing checks for 20 grand a semester or something like that. So even then it was certainly less affordable than it was when you went to school. But it was still at a point where it was doable. If you went and you got a part-time job, or, you know, you work 30 or 35 hours a week and maybe your parents kicked in a little bit, you could still kind of afford to go to school 20 years ago without getting student loans. Now it’s literally impossible without getting loans or a family member. That’s just going to give you the money. You cannot go work at Stater brothers, which by the way, also allows you to develop some, some useful life skills, you know, working your way through college that I could argue are life skills that are sometimes more beneficial to you than all the crap you’re paying for at the four year school.
Steve (26:06):
Well, here’s the funny thing is that when I was working my way through school, I actually was a police dispatcher on the graveyard shift. Not very exciting. Uh, but you know, that’s how I made extra money. And now ironically, those skills, 40 years later, uh, come in very handy for me as a public safety pilot for police, fire departments who knew that the part-time job would be the most beneficial thing.
Damon Day (26:34):
Steve, I’d known you over 10 years, we talk several times a week. And this is the first time I heard about that job. This guy has had more jobs that’s cause I’m
Steve (26:44):
An old fart.
Damon Day (26:45):
No, but most of these jobs, right, that were all before you were 30, I think he did like 50 different things in the, in the, you know, the years between 20 and 30 it’s I’ll be talking about anything, pick a subject and I’ll be like, Oh, well, one time, you know, I had a job doing exactly that. I mean, you, you harvested eyeballs at one point, I was like,
Steve (27:07):
Wow. All right. So here’s my police story. Right? Uh, two favorite stories from those days, one, uh, the pawn shop was broken into one night and it took the officers about 10 minutes to solve the crime because the safe was stolen, but the guy had just thrown a chain around it and dragged it home. Did he drop breadcrumbs? Just, it was really, I have you safe, just dug into the asphalt the whole way, just follow the drag marks. And then around the corner, he was like two blocks away. Yeah, of course it was, the pursuit was so slow. Uh, so then my other four-year degree probably, um, then my other favorite story was one night I was ending my shift and a call came out about a dog that had been hit by a car. And they were asking an officer to go over and uh, put the dog out of its pain and misery and shoot the dog.
Steve (28:04):
And I got on the radio. I said, don’t shoot the dog. I’m getting off. I’ll be right over. I’m going to take care of this. I found a 24 hour vet who would meet me. I called a friend of mine that had a station wagon. And I said, you got to help me. I’m going to scoop up this unconscious dog and we’re going to rush it to the vet. And we did just that. And the police officer, instead of shooting the dog said, I’ll give you a police, escort, lights, and sirens ahead. Doug was driving the station wagon. And, uh, I was yelling, don’t shoot the dog, don’t shoot the dog. And the, we hauled through town and we went over some train tracks, uh, and the dog woke up and all of a sudden there was an officer behind us. He goes, I saw you trying to say something, but I couldn’t see what you were saying. And I was yelling, shoot that dog. Now the dog woke up and it was in my lap. It was a Doberman and it wanted to kill me.
Damon Day (29:07):
You freaking do gooders,
Steve (29:09):
Shoot the dog. All right. So
Damon Day (29:12):
Hold on, hold on, hold on. At one point you wanted to talk about tax forgiveness and we went way off the rails.
Steve (29:19):
Oh no. I’m, I’m coming to it. Uh, here we come. So that’s like, I’m leading into this segue ready for it. That was the 20 minute lead in. Yeah. Yeah. So let’s talk about student loan tax forgiveness. That’s my segue. One more thing about college debt, uh, Damon, you know what, uh, it used to be that state schools, public schools, like you went to were subsidized by the state, investing in students to become more educated and to be more productive citizens. Now over the decades, the state subsidy, the state funding of colleges has pretty much gone away. And so that’s why another reason why schools are so much more expensive. Um, we had whether it was four decades ago or two decades ago, we had, uh, uh, certainly a better advantage than students going to school today.
Damon Day (30:17):
Oh yeah. I mean the biggest problem is easy money, you know? I mean, there’s a lot, like I said, it’s complicated. There’s a lot of problems, but you have easy money. Anybody can get the money to give to the schools. The schools are going to keep raising tuition prices as long as they have enough, as you mentioned in the beginning butts in seats.
Steve (30:31):
Yeah. And they’re going to also do, uh, what they have been doing, which is building out campuses, making schools bigger. All they’ve done is created a much larger infrastructure that they have to pay the monthly note on. Uh, so they have to keep selling butts and seats. But let’s talk about that. The tax forgiveness thing, uh, right now in this, uh, American rescue act, uh, one of the things that I almost almost guarantee is going to remain in it, but the cancellation of remaining student loan debt after 20 or 25 years in an income driven repayment plan was taxable under the old law, but would be forgiven tax-free under this new law with a huge, but a big, but, and the big, but is that, uh, this would only be good through 2025. It’s temporary. So if you, yeah, it’s temporary.
Damon Day (31:32):
You happen to be lucky enough to be on your last five year, four years of the IBR. Those are the only people. This is going to help
Steve (31:38):
The first borrowers under the income contingent repayment plan are now reaching their 25th year in payments.
Damon Day (31:46):
How many people are still on their original ICR?
Steve (31:49):
Yeah, probably six. And
Damon Day (31:51):
Nobody because IBR is cheaper and then repay his monthly payments even lower than that. So I think only five, I would, I would go on record. People might be on the original ICR. So, so this is going to help five people. So here’s the thing. I haven’t read this by the way, Steve’s throwing this stuff out in the cold. So this is a real reaction.
Steve (32:13):
So one thought is the reason this is going to pass is because there’s an expectation that, uh, the current administration is going to pass some sort of student loan forgiveness, right? Whether it’s $10,000 or whatever, then that would not be taxed. The other, the other logic is, uh, and this is, this is the logic that I hate and are talking logic
Damon Day (32:40):
And government in the same sentence. Yeah,
Steve (32:42):
Yeah, yeah. Okay. That was a mistake on my part. Uh,
Damon Day (32:46):
Yes, it was comic relief.
Steve (32:50):
One, one thought is this is going to pass. It’s going to right now, it’s going to expire in 2025. And here’s the bit Damon, certainly Congress will extend it.
Damon Day (33:03):
Oh yeah. I mean, what am I personally,
Steve (33:07):
Chances of that? Because we’ve had student loan forgiveness programs around for decades and Congress has never dealt with this. What are the chances they’re going to deal with it when this thing expires?
Damon Day (33:19):
Well, you know, and this is one of the biggest challenges I have with my federal student loan clients is because, you know, we, we have to, we have to make a plan that, you know, it’s 10 years, 15 years, 20 years, 25 years, you know, depending on the client’s situation. And so much of that plan is based on what the laws are going to look like in 10 years and 15 years in 25 years. It’s crap. And there’s absolutely no way to know, like when people talk about, Oh, you know, you get the IBR forgiven in 25 years. If that ever happens, the IBR probably won’t even be around in 25 years. It’ll probably be three or four different iterations of, you know, government laws that have pared it down. We have the repay now and there’s going to probably be some other new form of forgiveness.
Damon Day (34:05):
So the chances that a person that’s on a federal repayment plan now is still going to be on that same plan. 10, 15, 20 years from now is slim to none. And then you also have the ramification of, okay, if you do make it all the way to the end of this gauntlet, you apply to get your loans forgiven and they get forgiven. How do you plan for the tax liability, which is a big deal, because if you’re on an income based payment plan, your loan still is going to grow. If you’re not making those payments, it’ll grow slower. And it, depending on which plan that you’re on, but we w you know, I have clients that are, you know, multiple hundred thousands of dollars in debt. So we’re talking about a significant tax bill. And how do you plan for that? If you don’t know if you’re going to have that tax bill, and I’m talking to clients about, you know, insolvency rules and things like that, and you know how to not have assets in your name over the next 20, basically everything I’m talking about is the opposite of what somebody should be focused on.
Damon Day (35:06):
If they’re trying to build wealth and be successful in their life and have something to pass onto their kids. Now we got them on this plan that essentially is designed to try to make them almost like, make them poor. You know, that’s the goal. So they don’t have this, Oh, I got $400,000 forgiven. And now the IRS wants one 50. Great. Um, you know, out of the pan into the fire on this thing, 25 years later.
Steve (35:30):
Yeah. They’re just kicking the can down the road. Yeah. So Damon we’ve come to that point in the podcast. Wait, wait,
Damon Day (35:38):
Wait. We haven’t discussed whether or not that affects private loans.
Steve (35:43):
Uh, it does cover private loans. I mean, this temporary, you know, forgiveness thing does include private loans,
Damon Day (35:56):
But we’ve been, if you settle a private loan over the next couple of years, as long as this passes as is it November, even if, even if you’re solvent, there will be no tax liability. Whereas right now, before this passes, if you have more assets than liabilities, you would have a tax liability. If you had a private student loan that was settled or partially forgiven. Yeah.
Steve (36:19):
And let me use the disclaimer that until it’s actually passed and it’s signed into law, all of this stuff is subject to change. My father told me when I was much younger, the two things you never wanted to see being made were sausage and laws. And he was absolutely right. I mean, the laws can change before they are finalized. So we’ll just have to wait for the fine print. So don’t do anything drastic until the laws actually signed. So Damon, we have finally come,
Damon Day (36:50):
Apparently we’ve come to the end. I’m not going to say
Steve (36:52):
We’ve come to the end. It’s so, so, so sad. And this is it. This is the end of the podcast. This is it. You’re done game over game, over man. We’re death. Wish I still had that soundbite was the other one, a bunch of what was that? You lost, you lost all my sound bites. I’ve got them. I just have to, I’ll have to go find
Damon Day (37:19):
Them. I’ve got good sound bites. No,
Steve (37:21):
I still have them. I slap them even when I go into my falsetto bunch of hookers and cocaine. All right, well, uh, time will tell if there’s podcasts number two, but this has been debt-free dudes with Damon Day, and you can find his website, DamonDay.com DamonDay.com. He is an exceptional debt coach. If you have any sort of money worries or concerns, contact him, right. Couldn’t have said it better. All right. Couldn’t have said it better safe.
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