This week we had the chance to pick the brain of Betsy Mayotte. She is the founder of The Institute of Student Loan Advisors (TISLA) and has two decades of experience helping people manage their student loans.
How did you get into the world of student loans?
I graduated college with a business communications degree. At the time I could only find part time work and though that was an excellent job, I really wanted to move out of my parents’ house so when a friend told me about a full time call center position at a large student loan servicer I went for it. I worked there for several years and found I was good at explaining complicated things to borrowers stressed and confused about their loans. When that center shut down I tried, briefly, to “escape” the industry with a start-up. That turned out to be a terrible place to work so when a friend told me about a training position at another non-profit student loan company I couldn’t jump fast enough. The compliance officer at the time took me under her wing and encouraged my involvement in student loan compliance and advocacy work, which I loved. When she retired I was promoted to her job. I was at that company for 18 years. I consider myself very lucky to have worked for an organization that focused so much on the borrower and supported me in going beyond the typical compliance role in a way that had a real impact on struggling borrowers.
Now that we are one year into the Trump administration, how has the past year affected student loan borrowers?
At this point the effect on student loan borrowers has been more psychological than actual impact. Borrowers are VERY worried that the current administration will remove existing benefits such as Public Service Loan Forgiveness and the income driven repayment plans. In reality, there hasn’t been a single proposal from the administration or Congress that retroactively removes a benefit from existing loans. It’s also important to remember that Congress has NEVER removed benefits from existing loans. Instead, the proposals seek to change the program significantly in the future – and yes – one of those proposals would remove Public Service Loan Forgiveness and most of the income driven options from future loans.
One thing that the current administration has changed was to “postpone” some new regulations that would have made it easier for borrowers who were defrauded by their schools to receive relief on their federal student loans. Those rules were negotiated in 2016 (full disclosure, I was one of the negotiators) and were due to take effect July 1, 2017. Current Secretary of Education Betsy DeVos chose to postpone those rules two weeks before implementation and initiate a new negotiated rulemaking process to essentially start all over again. That harmed borrowers with pending claims by further delaying the administration of those claims, some of which had been pending for over 18 months and by forcing them to be measured against the old rule, which is a harder burden to meet than the new rule would have been. The feds have recently started to approve some of those claims in the last few months, but have instituted a way of measuring harm that is, frankly, very unfair to borrowers. Finally, the current proposal on the table at the new negotiation session, as issued by the ED, is extremely anti-consumer and if passed as is, would make it almost impossible for a defrauded borrower to receive relief. While this rule will only affect a minority of borrowers, it certainly can be intimated from this and other actions that this administration is not necessarily looking out for the borrowers best interests. Nor the U.S. taxpayer for that matter.
What do you think is on the horizon for the next three years?
Phew – crystal ball time which can be hard. Well, I do anticipate they will move forward with reauthorizing the higher education act at some point – but not until at least 2019. How that plays out will have everything to do with how the mid-term elections shake out. That’s a pretty big wild card. No matter what I do see a consolidation of current programs. While the “one grant/one loan” is primarily a republican slogan – I think everyone agrees at this point that there’s too much overlap in the federal aid programs and that this overlap is confusing and expensive. Right now there are technically six different income driven plans that are all exactly alike except where they are different – that’s confusing for industry experts never mind borrowers! So I suspect they will simplify all that (future loans only) and make changes to PSLF. If the republicans are still holding the majority I do think they might get rid of PSLF for future borrowers, but if they are not I still think they will change the program by capping the forgiveness amount and maybe adjusting the definition of eligible employment. There’s some proposals on the table now to reduce borrowing limits for graduate and parent borrowers – I’m not sure how that flies if the republicans lose the majority but it’s something to watch. Parent plus loans in particular are a real issue that nobody talks about. Those borrowers need help and the answer is not to push them to the private loan program, which the current proposal seems to do to some extent. The other issue to watch is schools – there are some that feel that it’s time for schools to have some skin in the game and the current republican proposal does a bit of that – I suspect a democrat majority might up the anti there.
I know you have been busy meeting with some of the rule makers regarding student loan repayment, any news on that front?
I’ve been talking to a lot of staffers about the need to expand access to the income driven plans to parent plus borrowers. I have also agreed with them that there are too many income driven plans and it’s become overwhelming to borrowers. I think the parent plus issue is one that many were not aware of but we all seem to be on the same page when it comes to the IDR’s. Those issues are all statutory so we won’t see any changes unless and until Congress makes them. These changes can happen as part of a budget bill, but at this point I think they’ll wait to do anything major until reauthorization. That means is that borrowers have more time to write their congressional reps to tell them how they feel about possible policy changes.
What is the one mistake you see far too many borrowers making?
Going turtle when they get overwhelmed by their debt. I’ve worked with probably thousands of borrowers over the years and there’s very very few people I haven’t been able to help. There’s almost always a solution and really no reason why anyone should default. If you are struggling, call your loan holder. If you are too anxious to do that, contact any number of free services out there – including TISLA. The other mistake I see is people not looking at the long term goals when determining a payment option. Just because you can lower your payment doesn’t mean you should. The name of the game is to pay the least amount over time – that usually means paying the most you can every month (unless you are pursuing PSLF or another forgiveness program). There is never a pre-payment penalty on student loans. Speaking of PSLF – pursuing PSLF may not be the way to pay the least over time – use the repayment estimator to see what strategy is the best for you – paying particular attention to the total amount to be repaid column.
If you could change one thing about student loan repayment or government policy, what would it be?
I would do something with Parent Plus loans. Either allow the student to be the endorser if the parent doesn’t pass an ability to pay component of the application and then allow them to use any of the IDR’s based on both the students and parent income, or, simply open up the IDR’s to parent plus borrowers entirely. The former probably has a better shot for budgetary reasons.
You said one thing but I’m going to give another because it’s sort of a tie – allow automatic recertification of the IDR’s through the IRS with the inclusion of easy to read disclosures every year that spell out the total amount to be repaid and how that could be lowered if they added X to their payment – sort of like what some of the credit card companies are doing.
I would also get rid of the master promissory note. Borrowers should have to sign a note every year so they aren’t as surprised by their debt levels. And I would bring back bankruptcy protections for private student loans.
Ok that’s way more than one – sorry – can’t help it.
What is the best way that borrowers can advocate for themselves on matters of student debt? Seniors have AARP, animals have PETA, who do student loan borrowers have looking out for them?
Oh there are lots. New America Foundation, TICAS, Higher Ed Not Debt, Harvard Predatory Loan Project – and of course TISLA. Borrowers should also check on who is on the senate and house education committees and consider those members as advocates. Write to them. To keep track of current issues follow TISLA on twitter @tisla_sl or on Facebook under The Institute of Student Loan Advisors.
What is the biggest misconception that non-borrowers have about student loans?
Oooh – I’ve never been asked this question before. Well, I think there’s still a big misconception out there that only “poor people” can get federal loans which is of course completely false. Or that they need good credit (there’s not credit check on most student loans, the ones that have one is very very mild). I think they also assume is that tons of people end up with 100K or more in debt and those are the ones struggling when in fact very few borrowers end up with that much debt and the ones that struggle are actually the ones with very low balances. That’s because the ones with high balances likely graduated and the ones with low balances did not. So the former have debt with degree (likely a graduate degree with those high numbers) and the ones with low balances have debt and no degree.
Why did you start TISLA and how are you funded?
I started The Institute of Student Loan Advisors (TISLA) for a few reasons. When I decided to leave my employer of 18 years I did so because they were changing missions to focus on higher education attainment rather than student loan counseling and while I appreciated the new mission, I realized that I had the opportunity to impact more people in a positive way by sticking with the student loan repayment area. It’s what I’m good at and with 44 million student loan borrowers out there and almost a third of them struggling with their debt, there’s a lot of people that need help. I believe very strongly that borrowers should have access to free, neutral advice and dispute resolution without being advertised to or having to register to access that help. I looked around for organizations that were doing that and couldn’t find any – so I created TISLA. I also did this to combat the vulture “debt relief” companies that are targeting vulnerable borrowers through deceptive advertising. They charge hundreds and sometimes thousands for programs borrowers can access for free. While some of these companies are transparent as to what they can do, there are too many that aren’t and not only overcharge, but end up hurting the borrowers and disappearing. Borrowers fall for the pitch because they are desperate for help – I want them to have another, safe and free, place to go for help.
The funding strategy for TISLA is a multi-pronged approach. I am pursuing grants and donations from foundations and organizations that have missions aligned with mine -helping consumers with their debt. I have also developed a premium service for employers and professional organizations with constituents that have student loan debt. This premium service offers content, webinars and dedicated phone numbers for their groups to call for help. This can be a great way for those organizations to retain their constituents and offer a useful benefit. We will never do referrals or advertising or sell or collect data to fund TISLA as I firmly believe borrowers should have a neutral place to go for help. If it gets to that point I’ll shut it down and start applying for jobs.
Thank you Betsy for all of your insight!