On this podcast Damon Day and I focused on reduced mortgage payments for people behind on their federally backed mortgage loans after Covid forbearance ends, why it is so easy to make bad emotional decisions, and adios to FedLoan Servicing.
Steve Rhode
Get Out of Debt Guy
GetOutOfDebt.org
Transcript
Steve Rhode: [00:00:00] So I just pressed record. So we’ve just started, Hey, Steve Rhode with Damon Day, you’re back for another, get out of debt guy podcast. We’re going to try to do these podcasts more rapid fire. You can get more information more quickly. I don’t think that’s the right way to say it, but
[00:00:19] Damon Day: [00:00:19] you get what you pay for here.
[00:00:20]Steve: [00:00:20] When we start charging for the podcast. Then we’ll start adding quality with a K. All right, Damon, I got a couple of things I want to talk about today. You want to go first or what?
[00:00:32] Damon Day: [00:00:32] No, because true to form, I don’t even have my notes in front of me. So you go first. Why think about stuff.
[00:00:37]Steve Rhode: [00:00:37] All right, so we’ll talk about, I have two things to talk about today. One is The administration has proposed, we got all these loans that are coming off forbearance. In fact, we’ve got about million mortgages that are going to come off forbearance pretty soon. And this is the tail end of the forbearance from the pandemic and the, I don’t care.
[00:01:02] You know what administration it is. These ideas just don’t seem to work for everybody because the new suggestion is to prevent foreclosure. When these loans come off, forebearance that federally backed mortgages can have payments reduced up to 25%. So that’ll extend the term of the mortgage even further.
[00:01:26] Now you’ve got, all these people, it was up to 4 million people. At one point it’s down to almost 2 million. Right now that are taking advantage of the coronavirus pandemic, don’t make a mortgage payment. And this has been going on for 18 months. So now you have all these people. This is like the student loan problem that we’ve talked about.
[00:01:44] You have all these people that are now used to not making payments. I don’t care if you reduce it by 25% or whatever, a struggling people are going to struggle to make any payment at all.
[00:01:58]Damon Day: [00:01:58] Yeah it’s just kicking the can down the road is all it is. We’re going to have a day of reckoning. It’s just a matter of when we’re going.
[00:02:04]Steve Rhode: [00:02:04] So you look at the numbers of people who are seriously delinquent on their mortgages. Right now, you’ve got about 3% of the total mortgages. Now what’s interesting is people who are falling behind or who want to sell quickly often don’t realize that they’re actually selling their homes to investment. buying up homes and then renting them out. So the availability of affordable homes continues to shrink as corporations, buy them up and rent them to you. So here is what. Isaac Boltansky, which Is a great name. He’s the director of policy research at compass point research and trading, which serves large institutional investors.
[00:02:47] I guess we’ll have to take that.
[00:02:48] into account. He said, if a reduction in monthly cost help keep that borrower in their home until they’re back on their feet, that’s a win for the borrower, the policymakers and Uncle Sam I don’t know. Just extending your mortgage down to 40, 50, 60 years. What’s the difference between that and renting at this point?
[00:03:07]Damon Day: [00:03:07] There’s not, there’s a lot of differences between that and renting, but just keeping somebody in their home I guess if you have a appreciation that could help them out. I see both sides of the equation. It’s almost once the government starts dabbling into it and starts trying to put band-aids on the bleeds.
[00:03:22] It’s just there’s no end in sight. There’s no, there’s never going to be an easy way to get back to quote unquote, normal. Some people are going to get hurt. It’s just the way it is.
[00:03:32] Steve Rhode: [00:03:32] That’s just the way it is. That’s right. If we
[00:03:34] Damon Day: [00:03:34] I did it’s way, the way it always been.
[00:03:37] Steve Rhode: [00:03:37] oh, you, you can’t paint regulation with a broad brush. It’s not going to work for everybody. That’s for sure. And research since the 2008, 2009 financial crisis found that by deferring mortgage payments and reducing interest rates or extending the term of the mortgage.
[00:03:54] It helps to aid homeowners that are short on cash and keep them in their home. They just can’t have an expectation that they’ll ever pay it off. If your mortgage is now extended out, let’s say 40 years and you’re over the age of 40, the chances of you ever paying that mortgage off are getting smaller and smaller.
[00:04:16]Yeah, you’re just making monthly
[00:04:18]Damon Day: [00:04:18] Yeah. You’re right there. They’re just buying time until it’s time to go into the old folk.
[00:04:23] Steve Rhode: [00:04:23] Yeah. Look at it. It’s this is why it’s so much like the student loan situation, because we look at these income-based repayment programs that the payments are so low to allow people to make some payment, but never pay off their loans. Unless they meet all the, what.
[00:04:41]Damon Day: [00:04:41] Yeah, I was just going to say, the interesting thing with the student loans and the big differences, with the housing is it’s a tangible asset. There’s a roof over your head, with the student loan. It’s not secured by any, if there’s nothing there, there’s no asset there. And a lot of students that would argue that the education was worthless depending on what happened to them after college.
[00:05:01] So that’s really going to be the interesting one. You’ve got the foreclosure crisis and, the moratoriums and all that, but when it really started to look at what’s going on with the student loans, that’s going to be. In my opinion, much, much bigger than the mortgage.
[00:05:13] Cause you only said what, there’s 3% of people behind on mortgages right now, roughly. And I don’t know. What do you know what yeah. Do you know, I’m just curious. Do you know what the normal like on, in a quote unquote normal year, the percentage of people at any time behind on mortgages is,
[00:05:32] Steve Rhode: [00:05:32] I do
[00:05:33]Damon Day: [00:05:33] that’s why I asked you
[00:05:35] Steve Rhode: [00:05:35] have it right here.
[00:05:36]Damon Day: [00:05:36] You’re the numbers research guy. I don’t know anything until I say, Hey Steve.
[00:05:40] Steve Rhode: [00:05:40] All right. So, in September, August and September of 2020, the that’s when the maximum delinquency was occurring, it was 4.4% of all mortgages were 90 days or more behind. And it’s now down to 2.9.
[00:05:56]Damon Day: [00:05:56] but that’s because they don’t, they’re not counting the moratoriums.
[00:06:00] Steve Rhode: [00:06:00] That is, let me see. It’s just talking about people who are seriously delinquent and those are people who may be in a forbearance plan with foreclosure coming in the months ahead. Now, keep in mind.
[00:06:16] Damon Day: [00:06:16] less than it was?
[00:06:17]Steve Rhode: [00:06:17] People started, the economy started recovering people, started making payments again, picking up where they left off.
[00:06:23] Another problem with this program has been lenders like Wells Fargo. That’s stuck people in forbearance programs without consumers ever asking them. It’s turned out to be a real mess because on their credit reports, it was showing they’re in forbearance, but they’re making monthly payments. So it’s all screwed up.
[00:06:41]Every time it’s like student loans. That’s my next story. I want to talk about today with student loans, but I’m gonna let you jump in with what you have.
[00:06:49]Damon Day: [00:06:49] I just to finish my thought on that that last topic. So we almost got to. What’s the percentage of people be seriously delinquent on student loans.
[00:06:58]Steve: [00:06:58] Now student loans, not that is an interesting number because when you look at the number of people, it’s, they always use the number of people who have missed payments or behind on their payments. And the government fails to generally include the number of people who are in deferment or forbearance.
[00:07:18]Technically, those are people who can’t make their payments right now. And that number is about 25 to 30% of all student loans are not making current payments. Hey, No. doubt about it. The number is huge.
[00:07:31]Damon Day: [00:07:31] Yeah. So we’re talking about the mortgage crisis. Forget that’s nothing.
[00:07:36] Steve Rhode: [00:07:36] Yeah.
[00:07:37] Damon Day: [00:07:37] of people are, delinquent on their mortgage, but half the country are delinquent on their student loans.
[00:07:41]Steve Rhode: [00:07:41] Yeah, it’s just one problem on top of another that I totally understand. And in this equation between you and me, I’m the more liberal part of it. And I totally understand why we had to bail out people and give them moratoriums and all that other stuff because of COVID, which was an unusual situation.
[00:07:59] But. Simply putting payments on pause and then resuming at some point in the future, people’s budgets have changed and they’ve expanded and as the economy has improved, they’ve used that money for other obligations. And then when you add back in student loans or mortgages or car payments or whatever it is generally that can fracture a budget.
[00:08:21]Damon Day: [00:08:21] Wait, are you telling me that everybody that got a moratorium or forbearance on their student loan because of COVID, hasn’t been diligently setting aside that monthly payment in their savings account. So that when that starts back up again, Two years later, they can be like, oh, I got this. I got 20 grand just sitting there.
[00:08:41] I’ve been socking it away. Just waiting for the time is going to
[00:08:44] Steve Rhode: [00:08:44] Oh, my God. that’s, the funniest thing
[00:08:47] Damon Day: [00:08:47] does, right? Yeah. There are two people that have done that.
[00:08:50] Steve Rhode: [00:08:50] Yeah. Here’s the other thing, your argument about the homes are collateral, right? One of the arguments that I hear people making about student loans is they got the degree and the degree is the collateral, that’s the asset that.
[00:09:02] they got after investing in the student loans yet, 75% of people who took out student loans never graduated.
[00:09:10] So they just have the debt. That’s all.
[00:09:12]Damon Day: [00:09:12] Yeah, this is a. I don’t think we want to get into it on this podcast. As far as I would just say that for some people, college is a scam. You start looking at certain situations and, I know not everybody’s the same, but some people should not be going to college.
[00:09:29] Some people should not be pursuing the type of degrees they’re pursuing based on. You know what they’ve got going on in their life and you kind cry at some point, you cross over this barrier of someone, sold them a bill of goods, whether it’s the counselor or the school or whatever,
[00:09:47] Steve Rhode: [00:09:47] society.
[00:09:47] Damon Day: [00:09:47] sat down with the 17 year old kid.
[00:09:49] Exactly. And just really, oh this is the only way you can get ahead. Throw some stats at them. You gotta do this, you gotta do this. You gotta do. In four or five, six years later that, 18 year old is now 23 graduated having a hard time finding a good job. According to the type of job the counselor said, they were going to be able to get, and they’re sitting here staring at $1,500 a month and student loan payments and, and in hindsight, that was not a good decision.
[00:10:16] And you can look at that and say, that kinda sounds like a scam, basically convincing somebody to buy something that they shouldn’t be buying with money that they don’t have. It’s pretty close to the definition of a scam.
[00:10:29] Steve Rhode: [00:10:29] I would agree it’s and it breaks people’s minds when you talk like that because they can’t understand, but college is good. College is where I need to go. And yet, I don’t know what kids are thinking about today. Coming out of high school about selecting colleges. In my day one of the prime ways to select a college was which one is the best party school.
[00:10:50] And how far can I get away from mom and dad? And if you’re going to spend 75 or a hundred thousand dollars that is not the reason to go to school today.
[00:11:00]Damon Day: [00:11:00] It’s hard when you’re 17 and 18 and you’re talking to the guidance counselor, or you’re a parent of a 17, 18 year old kid and, Been told your whole life, that college is the only way. And you want your kid to be successful. Every parent wants their kid to be successful.
[00:11:15] And it’s very hard to say no, when society is telling you that this is how your kid’s going to be successful. And don’t worry, all you have to do is sign here and we’ll take care of everything. It’s really hard as a parent to say no to that. You know what I mean? And so it’s just, it’s gotten to the point where it’s.
[00:11:32] Out of hand is the understatement of the year.
[00:11:36] Steve Rhode: [00:11:36] So my equation, my equal thing to look at when you’re thinking about school and you’re going to find this totally off the wall is. Hot shot trucking. so hotshot trucking is, I don’t know how it comes up with the name, but it’s people who get a pickup truck and a trailer and they go out and they move freight or they move cars or something like that.
[00:12:00] And the reason I mentioned it is because you don’t have to have a college education to do that. But there are some people who will go out and get a truck, get a trailer, and there’ll be very successful, but they have to apply themselves in ways that a lot of people don’t, you have to be away from home a lot.
[00:12:19] Steve: [00:12:19] You have to work six days a week. You have to always be on the go self marketing, be an entrepreneur and a businessman and a closer and all that stuff. Not everybody is good at that. And yet those people didn’t go out and spend all that money for college degrees . But they have lots of income opportunities.
[00:12:38]Look at right plumbers and other trades that can make a heck of a lot of money without having to go to college.
[00:12:45]Damon Day: [00:12:45] Actually I think some of those hot shot guys that you and I watch on YouTube probably did go to college and they started the hot shot business to pay back the college that didn’t you do anything for him?
[00:12:56] Steve Rhode: [00:12:56] You’re probably right.
[00:12:58] Damon Day: [00:12:58] They became, he became an entrepreneur out of necessity. So maybe in a backwards sort of way, college was a good thing for them. It forced them to figure out how to make money after they graduated so they could pay it back.
[00:13:10] Steve Rhode: [00:13:10] Yeah. I think you and I have both achieved a master’s degree in life and what not to do at times too.
[00:13:16] Damon Day: [00:13:16] Yeah. And I think that hot shot trucking I’ve had, I’m one of those weird people that like to drive, when we go on vacation, we hook up the trailer and we’d drive. I just got back from a trip that was 8,200 miles we went to New York for a. Tournament for my son. And we turned it into an 8,200 mile trip and I’ve often thought about, I don’t think I’d ever do it, but I could drive, I could hot shot truck.
[00:13:36] I do financial consulting. It’s just a laptop and a cell phone. And I can talk to my clients anywhere. I’ve been thinking about, man, I could drive truck and double dip. And talk to my clients while I’m on the road. And every time I think about it, I’m like, oh, I get it. But then I get to, oh I’m going to be away from my family a lot.
[00:13:51]
[00:13:51]You start bringing up all this practical crap about, licensing and insurance and yeah. All this stuff. And then I start running the numbers and I’m like, oh man, to make up for all that, I would have to like, literally do it full time. I couldn’t just dabble in it because I’m paying two grand a month for insurance or whatever.
[00:14:09] And you’re just total captain buzzkill on my dreams.
[00:14:12]Steve Rhode: [00:14:12] Sorry.
[00:14:13]Damon Day: [00:14:13] Yeah. Prac practical Steve, over here.
[00:14:17] Steve Rhode: [00:14:17] all right.
[00:14:17] Damon Day: [00:14:17] likes practical Steve.
[00:14:18]Steve Rhode: [00:14:18] On that note, I’m going to practically turn to you for what you want to talk about today.
[00:14:22]Damon Day: [00:14:22] What I was going to talk about is pretty much unrelated because in true to Steve form. He doesn’t like to do the show before the show. So what that means is I have no idea what he’s going to be talking about until he starts talking about it.
[00:14:37] Steve Rhode: [00:14:37] Yeah.
[00:14:37] Damon Day: [00:14:37] topic that I was going to talk about today, it was a situation I had a while back with the client and it has to do with debt obviously, but it really is about when you’re in debt and you say this all the time, don’t make an emotional decision.
[00:14:51] Don’t rush into anything. And it’s more about. Taking a step back and seeing the full picture of your situation and what you’re trying to accomplish. And I know when you when you have this debt, you have this tendency to be reactionary and you’re scared and you’re, you got this fear of the unknown and what’s going to happen.
[00:15:08]But oftentimes it makes it easy to make bad decisions and make what seems like a very tough situation, much worse and case in point with this client. Is she wasn’t working, she didn’t have any income. And she had a situation where she needed to make some changes. She was looking for a job, but literally she had roughly 10 grand to her name, and she had a couple of debts that she was worried about these credit card debts.
[00:15:32] And she really wanted me to resolve them for, call the creditors, work out a deal, and make a settlement offer, just, get them resolved so she wouldn’t have to stress about them. And the problem with that. It would take pretty much all of that $10,000 to do that based on the balances that she had on those cards.
[00:15:50] And, but she was just so focused on, I gotta get rid of this debt. She wasn’t really thinking about what’s the highest and best use of that $10,000. You’ve got no income. The last thing you want to do right now is give that 10,000 to some company and then have no income and no savings at all. It would make a bad situation, much worse.
[00:16:10]I essentially convinced her not to resolve those accounts at that time, even though it took a while for me to convince her that keeping her money for now, until she got a job made the most sense.
[00:16:23] Steve Rhode: [00:16:23] A job.
[00:16:25] Damon Day: [00:16:25] job. Yeah. Job something just to get some money coming in first. So you can meet your basic expenses, keep a roof over your head, buy food, that stuff.
[00:16:33] That’s the important stuff. And a few months later she ended up getting sued by discover, which is scary to a lot of people, but it’s not that big of a deal. I can still resolve. And then she was, at first she was upset. Like I told you to solve this. I told you to get it resolved.
[00:16:47]And I said, okay I can settle it right now if you want. So tell me how, the job search is going well, she hadn’t found a job yet.
[00:16:55] Steve Rhode: [00:16:55] What
[00:16:55] Damon Day: [00:16:55] And I said, all yeah. And I, and she’s still looking, she’s doing her best and it’s just, it’s tough out there. And I said how much of that 10,000 do you have left?
[00:17:03] Cause it’s been a couple of. And she said you were right. I needed most of that to get me to where I’m at now. I’ve got about $3,000 left and I said, and she’s but I need you to resolve, discover.
[00:17:15] Steve Rhode: [00:17:15] Yeah.
[00:17:16] Damon Day: [00:17:16] And I said, no, you don’t need me to resolve the discover account.
[00:17:20]It’s you’ve only you’ve gone from 10 down to three, which means you’ve been burning through that at a couple thousand dollars a month. You have to get a job. In the next month or a year sunk, like who cares about discover? And what really bothers me is if she would have, cause we’re going to get her straightened out, she’s, it’s going to be fine.
[00:17:39] She’s going to end up getting a job and then we’ll work out a deal with discover when she has the income to be able to afford to pay them something. And it’ll be fine. If you’ve got no job, the credit unsecured creditor can’t do much to you. So that’s the first thing
[00:17:51]
[00:17:51] You gotta realize it’s, you got this.
[00:17:53] You build up the sphere of what’s going to happen in your own mind, but oftentimes when you really start to unpack it, there’s nothing they can do. And if you don’t have a job and you only have three grand to your name discovers the last thing you should be worried about, and, but what bothers me about the whole situation.
[00:18:10] Had she called a debt settlement company or
[00:18:13] Steve Rhode: [00:18:13] Oh, yeah.
[00:18:13]Damon Day: [00:18:13] A credit counseling company or something like that. They don’t take the time to pick a step back and say wait a minute here. You shouldn’t hire us yet because so solving that debt is not your number one priority. They don’t do that. They say, oh, you got 10 grand.
[00:18:28] We’ll happily take it and settle this debt. So what, where would that have left her or left her broke penniless. No job, no savings. not making phone calls anymore that you could just block. So the benefit would have been her phone doesn’t ring. The downside would have been, she’s got nothing, not even a dollar.
[00:18:46] And now she’s in a real. And that’s the thing that I wanted to bring up, which was, when you’re in debt it’s rarely ever an emergency take a step back and come up with an overall plan and strategy and focus on what’s important when you have very limited funds, unsecured debt is not important when you have limited funds and not much coming in.
[00:19:04]Steve Rhode: [00:19:04] You talk to lots of debt collectors on behalf of your clients and try to work out situations. And one of the things that I learned over the years, and I also really got. When I was dealing with my own financial problems many years ago, which was instead of being afraid, when the debt collector calls, you don’t have to promise anything, but you also don’t have to be a jerk either.
[00:19:27]I always say make the debt collector, your friend, you can say, Bob have a nice day. Yeah,
[00:19:31] I don’t have any money to pay you, how are the kids and establish a relationship with them and just be friendly.
[00:19:38]Damon Day: [00:19:38] no, that’s absolutely true. I, every conversation I I shouldn’t say every, there’s been maybe a handful over the years where I hung up and I was like, what what.
[00:19:47] Steve Rhode: [00:19:47] Yeah.
[00:19:47]Damon Day: [00:19:47] If this was my show, I would have said the word, but I’m not sure what your parameters are on your show, but, most of the time they’re just, people that have jobs they’re trying to, do their job and they’re actually nice.
[00:19:58] And for the most part, sometimes they’re. Deceptively nice where there, actually shady and they’re just trying to see what information they can get out of the person. But like Steve said, as long as you’re, know, you’re not disclosing any information, you have the right to remain silent when you’re talking to a debt collector.
[00:20:14]But saying, Hey, look, I understand. I owe the money. I don’t have it right now. I’m going through a lot of stuff. I’m working on it. And as soon as I have something, I’ll give you a call back as a polite way to end the conversation. Although you do have to be a little bit forceful with it because the debt collector is trained to keep you on the phone, keep talking.
[00:20:30] Cause then the next thing they’re going to say is, oh maybe you have a family member. You can borrow it from, or maybe you can go get a loan from the bank. And it’s bitch, oops. I shouldn’t, that’s not my show. Sorry, bleep that out.
[00:20:40]Steve Rhode: [00:20:40] You know what? You can always trade a banana bread recipe or something, you don’t have to make a promise. You can’t keep
[00:20:46]Damon Day: [00:20:46] Yeah. The biggest takeaway though, is if I meant that in a funny way. Cause, cause I was going to say, Bitch, please have you seen my credit report? And I can’t get a loan from anybody. That’s always my favorite when you got debt collectors calling and they’re helpful, suggestion is, can’t you get a loan to pay this one off.
[00:21:06] And it’s if I could get a loan, I would not owe you the money.
[00:21:09] Steve Rhode: [00:21:09] That’s right. Life happens.
[00:21:13] Damon Day: [00:21:13] Real quick. So I w whenever I get that one for a client, which is not that often anymore, but I always used to say, sure, are you willing to loan the client some money so they can pay you back? You are a lender after all, and they say, no. They’re like then why would you think another lender?
[00:21:27]Steve: [00:21:27] The woman that you talked about that, owed the 10 grand to discover it. It’s a classic situation of why it is really beneficial to talk to. I was going to say someone like you, but talk to you. DamonDay.com. You can find him at DamonDay.com because a third party who was not emotionally attached and invested in a situation can make far experience too, can make far better informed decisions to help guide you along the way about what you should do instead of just reacting.
[00:22:01] The thing about debt is people that have debt have generally. Not been in this position before it impacts their self-esteem and their self-worth. It’s not like they’re running out there to ask friends for advice and questions. And so they end up dealing with these things alone, lost lone afraid, confused, and making bad decisions along the way.
[00:22:22] So that’s why I’m so glad that woman talked to you. And do you have her on the straight and narrow yet? Or is she like getting.
[00:22:31]Damon Day: [00:22:31] She’s still, again, trying to get that job, which is, number one priority. But the biggest thing is, not knowing what, in this case discover can, and can’t do is huge because it allows her to clear up her mental space, not dwell on it and not stress about it every day and focus on because if she doesn’t get a job, she’s got much bigger problems.
[00:22:52]So she doesn’t need to be sitting there worried about how am I going to pay back, discover how am I going to pay back discover? And the biggest thing my clients tell me is just the peace of mind of being able to bounce things off of me and get some straightforward advice about here’s what, what can happen if you don’t do this.
[00:23:07] This is the only thing that the creditor can do. Here’s worst case scenario. And here’s how you can counter that if that happens. But most importantly, we can do this and buy you the time that you need. To go out and do whatever it is that you’re going to do. So just that peace of mind of knowing what can happen, I feel is the biggest benefit that the clients get when they call.
[00:23:27] And they talk to me and they, the beginning of the call, they’re in a huge panic by the end of the call. They’re like, okay, my situation hasn’t changed at all, but I actually feel better about it. And that’s key.
[00:23:38]Steve Rhode: [00:23:38] that is the Damon Day touch. You help people feel better about their situation. And you know what you should throw in some free banana bread recipes to.
[00:23:48] Damon Day: [00:23:48] Yeah no, don’t get me wrong. We’re also going to get the situation solved. But in that moment,
[00:23:52] Steve Rhode: [00:23:52] Yeah. Oh, I
[00:23:53] Damon Day: [00:23:53] you choose, feeling one way about a situation versus feeling the opposite way can dramatically affect the overall outcome.
[00:24:00] Steve Rhode: [00:24:00] Yeah, I totally agree. it’s the difference between sleepless nights, suicide divorce. Or let’s just deal with it. We can deal with it. No problem.
[00:24:10] It’s. It’s just debt for crying out loud.
[00:24:13] Damon Day: [00:24:13] I always tell clients it’s your creditors problem. Really? Not yours. They’re the ones that are owed the money. So relax.
[00:24:20] Steve Rhode: [00:24:20] right. This show’s going long and I’m the one that gets to edit it. So let me wind up this podcast with, can you believe it’s already been like 30 minutes? Unbelievable.
[00:24:31] Damon Day: [00:24:31] You, said you had two topics, I was like, it’s going long, bro.
[00:24:35]Steve Rhode: [00:24:35] So here we go. Fed loan servicing, right? The people who have been in charge of administrating public service, loan, forgiveness, Damon, I don’t know if you’ve heard about this, but this is going to be such a bad mess. FedLoan servicing has told the department of education. We don’t want to service loans, right?
[00:24:54]Steve: [00:24:54] That’s almost 9 million student loan borrowers that are going to get transferred to other companies. Cause FedLoan servicing is getting out. Had you heard that?
[00:25:05]Damon Day: [00:25:05] No. And how do you, the name is FedLoan servicing. So how do you get out of it with the name like that?
[00:25:12]Steve Rhode: [00:25:12] They’re actually Pennsylvania higher education assistance authority. That’s the underlying yeah. And another student loan, servicer, granite state. I don’t know if you’ve ever dealt with granite state or not. They only
[00:25:24] Damon Day: [00:25:24] have, but they have a very small percentage of loans compared to FedLoan
[00:25:28] Steve Rhode: [00:25:28] yeah. They only handle about a million student loans as opposed to federal and servicing.
[00:25:33] which is about actually about eight and a half million.
[00:25:35]Damon Day: [00:25:35] FedLoan servicing for the most part, does all the public service loan, forgiveness applications.
[00:25:41] Steve Rhode: [00:25:41] not for the most part for the entire part. They do all of that. They do a public service loan forgiveness, and the teach grant program. So all of that is going to get transferred. They’re going to have to transfer right now with the two services baling. The department of education is going to have to transfer about 10 million student loan accounts to other loan, servicers that not only is that going to be, make a mess, but this is on top of those student loans are coming out of their forbearance or deferment at the same time.
[00:26:16] As all these things are going to get transferred. Here’s what fed loan servicing said. And I totally agree with this in the 12 years, since FedLoan servicing accepted the terms of its federal servicing contract, the federal loan programs as managed by the U S department of education have grown increasingly complex and challenging while the cost of service, those programs has increased dramatically.
[00:26:41] And at the same time FedLoan servicing. Sued all over the place, for the lack of quality advice and service that they’ve delivered. So if you thought it was going to be a mess before now, you got 10 million student loan borrowers who are going to be coming out of
[00:26:56]Steve: [00:26:56] And going to be, have their loans end up, who knows where a mess will ensue.
[00:27:03]Damon Day: [00:27:03] Is this what they mean when they say boondoggle?
[00:27:06]Steve Rhode: [00:27:06] Don’t know.
[00:27:07]Damon Day: [00:27:07] I hadn’t heard that. When did that come out?
[00:27:09] Steve Rhode: [00:27:09] And the last couple of days,
[00:27:11]Damon Day: [00:27:11] That is going to be a major. There’s just so many borrowers that, the way the public service loan forgiveness works is you don’t really even get to apply for it until you get your supposedly 120 payments in and fed loan servicing is the one that is supposed to be tracking those and updating you every year.
[00:27:31] And I don’t know about you, but usually when databases get transferred to other
[00:27:35] Steve Rhode: [00:27:35] Oh, it’s a
[00:27:36]Damon Day: [00:27:36] It’s it’s pretty much, it all goes real smooth most of the time.
[00:27:39] Steve Rhode: [00:27:39] Yeah. 10 million accounts. It’s going to be perfect. Don’t worry about it.
[00:27:42]Damon Day: [00:27:42] And
[00:27:43] Steve Rhode: [00:27:43] It’s
[00:27:43] Damon Day: [00:27:43] going to have a situation. It’s okay. So you’re going to have a situation where you’re going to have a bar or that’s that made their hundred and 20 payments, and they’re going to apply for it. And they’re going to get rejected because the computer doesn’t say they made their hundred and 20 payments.
[00:28:00] And then, FedLoan servicing is going to go off and do, who knows what, or break up or form a new entity or whatever they’re going to do. And the borrower’s really going to be left with no recourse, trying to force the government to. Honor some forgiveness program. When the government records show that they didn’t meet the criteria yet.
[00:28:19] And short of filing a lawsuit, which is going to cost more time, effort and money. I should have been a lawyer. Lawyers always get paid, man, and that they’re going to be just forced to suck it up. And all you got three more years on your plan or whatever it’s going to be. They’re going to have no good recourse to fight it.
[00:28:36] Steve Rhode: [00:28:36] FedLoan servicing. You mentioned, what are they going to go do? They have said they will continue to expand their successful commercial servicing and mission-based student lending software as a business and focus on the Commonwealth of Pennsylvania. They’re servicing and a half million accounts.
[00:28:57] Steve: [00:28:57] Where do you think all their employees are going to go? They are all going to be looking for new jobs and hoping that they get their mortgages and car payments and student loans on forbearance. Yeah.
[00:29:06]Damon Day: [00:29:06] Yeah, I can’t blame them. If you have a choice between working in a private, which is what they’re doing there, their private sector accounts are profitable. And working with the government sucks
[00:29:16]Steve Rhode: [00:29:16] Let’s just use public service loan, forgiveness. And this is going to be a difference in political administrations. So under the last administration, even though FedLoan servicing. You are qualified and have made all of your payments for your public service loan forgiveness. The past department of education said, oh, hold on a minute.
[00:29:39]You can’t trust them that doesn’t count. We have to review your application. And it’s going to take us some time to review the application and you need to continue to work for your employer, that qualifies, and you need to wait for us to make a determination . So the vast majority of people that applied were turned down, we have to wait and see what happens under this administration.
[00:30:01] But I don’t know how any company would service loans over 12 years over multiple political administrations and be able to control the quality of the services and cost and, do a good job. That’s just impossible. So bye-bye.
[00:30:16]Damon Day: [00:30:16] They can’t, this is why, this is why when I talk to clients, it’s and I, the, the advocates for, bringing back bankruptcy protections, this is what they point to all the time that cause you know, the opponents of bankruptcy protections always say, oh, you have IBR and you have.
[00:30:29] Public service loan for elderly’s programs. And it’s no, these programs all suck. In theory, maybe the ideas sound pretty good, but you’ve got this for lack of a better word is massive boondoggle that, your promise forgiveness in 20 years or 25 years or 30 years, you’ve been on what program you’re on.
[00:30:47] And how can you have any confidence that you’re ever going to get that, but yet people have to literally plan their lives around this debt. Am I going to go into public service so I can try to get this? People have taken lower pane, public service jobs in order to get this promise forgiveness after 10 years.
[00:31:06] And if they don’t get that, how is it? It’s certainly not fair. They’ve made life decisions based on these rules and these laws, and then these things change all the time. And so whenever you can avoid getting into a government program, you should, if you have the ability to resolve your student loans in a different way would be my recommendation.
[00:31:27] Steve Rhode: [00:31:27] And as a qualified liberal, I would like to say, I totally agree. That’s a surprise. Isn’t it?
[00:31:32] Damon Day: [00:31:32] No way.
[00:31:33] Steve Rhode: [00:31:33] No way. I know. All right, that’s it, man. We gotta get outta here. Cause I gotta edit this crap. So you’ve been listening to the, get out of debt guy show with Damon Day, DamonDay.com is the place to find him.
[00:31:48] And if you want that banana bread recipe, I’ll send it on to Damon. You can get it from him. So
[00:31:53] Damon Day: [00:31:53] Yeah. And edit, edit that word out. Cause I don’t think it came across the, in the joking way that I intended.
[00:31:59] Steve Rhode: [00:31:59] W when you, your bitch word.
[00:32:03] Damon Day: [00:32:03] It was supposed to be like, bitch, please. When I didn’t get to the police, you started laughing. It was intended in that kind of a joking way. And then it just came out bitch. And that’s not how it was. Don’t say that to the debt collector. I don’t want that to be the takeaway.
[00:32:15]Steve Rhode: [00:32:15] You don’t have to be a bitch about it. Come on, let me do my job.
[00:32:19] Damon Day: [00:32:19] Yeah. And that would have been self-talk that’s not, what’s coming out of your mouth when you’re on the phone with the debt collector.
[00:32:25] Steve Rhode: [00:32:25] That’s all right. That’s your inside voice.
[00:32:27]Damon Day: [00:32:27] Yeah. That’s the internal voice we all have. Don’t confuse that.
[00:32:31] Steve Rhode: [00:32:31] Don’t say it out loud. All right.
[00:32:34] Damon Day: [00:32:34] Exactly.
[00:32:35] Steve Rhode: [00:32:35] Tata for now.
[00:32:36]Damon Day: [00:32:36] That’s your exit.
[00:32:38] Steve Rhode: [00:32:38] Apparently.
[00:32:40] Damon Day: [00:32:40] Alright. See ya.