Bill Klaproth (Host): This is an AAOMS On the Go Podcast. I'm Bill Klaproth. And with me is Jacque Chevalier Mosely, a former congressional staffer with the House Education and Labor Committee and Managing Director of Government Relations at Nelnet, a student loan servicing company, as we talk about navigating OMS student debt. Jacque, thank you so much for your time today. Welcome.

Jacque Chevalier Mosely: Thanks for having me, Bill. It's great to be here.

Host: Yeah, it's great to talk with you. So, can you start off by sharing a little bit about yourself, particularly your knowledge and expertise in the student loan environment?

Jacque Chevalier Mosely: Sure. As you said, I was a staffer on Education and Labor for the House. I served under two chairs or, I guess, ranking members/chairs, George Miller from California and Bobby Scott from Virginia. So, I was on the Democratic side. And I ended my tenure there almost a decade. I was the Director of Education Policy. So, we had jurisdiction over the Direct Loan Program, and that includes basically all student loan debt, save private student loans, which account for less than 10%. So, generally, when you're hearing the 1.6, 1.7 trillion, it's discussing the debt held by the federal government.

Host: Wow. So, you really know the ins and outs of student loan debt, really, from where it starts with the federal government, is that right?

Jacque Chevalier Mosely: Yes. Actually, I am a student loan borrower. I had private loans, unfortunately. I did not take advantage of the federal program. But yes, I know more than most people, I would say, about the student loan program.

Host: Right. All right. So can you highlight some of the contributing factors that in recent years have resulted in high student debt loads?

Jacque Chevalier Mosely: You know, really, when we look at over the course of the past 10 to 15 years, the real driving factor has been graduate debt. When you look at the kind of the makeup of the federal student loan portfolio. And it's important to point out that prior to 2010, it was a guarantee program, so the federal government wasn't lending money, the government was backing private lenders. But in 2010, as a pay forward for Obamacare, we switched. And so now, it is all direct loans. Every loan originated after 2010 is owned by the federal government.

Congress, in its infinite wisdom, this happened before I got there, but we made some significant changes to borrowing. Undergraduate borrowing has loan limits. So, you are capped at how much you can borrow, and it's not a particularly easy-to-explain system, but all you need to know is that there is a limit. So per year, you can only borrow up to a certain amount. For graduate borrowing, however, you can borrow up to what is called the cost of attendance, and the cost of attendance is set by the school. And we have really seen a ballooning of graduate debt and of the cost of graduate programs really over the course of the past 15 years. If you look at the makeup of their portfolio, that's really what's driving a significant increase.

And, you know, I think important for those probably listening to this podcast today, a recent survey of OMSs who finished residency with just within the last five years found that more than three quarters had student debt of more than 300,000 upon finishing residency. And obviously, this is a unique population given the combination of graduate degrees they have to have, but we're seeing this across the spectrum of graduate degrees.

Host: Wow, what a stat. More than three quarters of OMSs had student loan debt of more than $300,000 upon finishing residency, you said. Oh my gosh, it's like graduating school and having a mortgage, without the house.

Jacque Chevalier Mosely: Yes, exactly.

Host: Oh my gosh, that's craziness. So when you say this ballooning of graduate debt, that's what you're talking about, right?

Jacque Chevalier Mosely: Yeah, exactly. But we're seeing this across the board. So, law, creative writing. I mean, it's like graduate school is just really, really, really expensive. It's gotten exponentially expensive. And when you look at kind of the inflationary, like the pass through, students are bearing the brunt of it.

Host: Yeah, absolutely. So, Jacque, we hear a lot about the Public Service Loan Forgiveness Program, which is designed to provide relief to those in public service. Can you explain this program and how OMSs might benefit from it?

Jacque Chevalier Mosely: Yeah, sure. So, the program was conceived and written into law in 2007. Important to note that the authorizing statute is written, I would argue, pretty poorly. Some would say it was done intentionally, others contested it was not. But it is very narrow in who can benefit from it. So it's really, really important that if you're interested in Public Service Loan Forgiveness, you get in touch with your servicer and talk through the eligibility requirements.

I should point out that under the Biden administration, there is what they're calling a waiver, a time-limited waiver, that is allowing those with FFELP loans, those are loans that were originated prior to 2010 under the old guarantee program, to consolidate into the Direct Loan Program and count past payments toward forgiveness. Under the Public Service Loan Forgiveness Program, you have to be employed with a qualifying employer. It doesn't have to be one single employer, but a combination. You have to make 120 qualifying payments working for a non-profit, a government entity, serving in the military, being a teacher – and that is all delineated in statute.

Like I said, it's been plagued with some challenges. There was a lot of focus back in 2017, '18, '19, as the first cohorts were in theory becoming eligible. A lot of borrowers thought they would be eligible and were not deemed eligible because they had old FFELP loans, and that was – the law was written that way. So if you have an old FFELP loan and you're interested in accessing Public Service Loan Forgiveness, you need to consolidate that loan into the Direct Loan Program. Ten years of qualifying payments. You do have to be employed with a qualifying employer when you seek forgiveness, that is another kind of bug of the statute. People don't like it, but it's the way Congress wrote it. So, for those listening today, it's being employed by a non-profit hospital or, you know, a non-profit medical provider. That would be how you would qualify.

Host: What about for an OMS that starts his or her own practice? You mentioned having to work for someone. For someone that says, "I'm going to do this on my own. I'm going to be self-employed," what then?

Jacque Chevalier Mosely: So, under the current statute that you would not be eligible unless you were a non-profit.

Host: Okay.

Jacque Chevalier Mosely: Yeah. You would have to start your own non-profit, which you could do, and people do do. But, you know, it is intended to entice. Basically, the policy is the trade off, right? So, you are making less money, serving lower income areas where there's lack of access in exchange for then getting your loan balance written off after 10 years. You do have to be enrolled in what is called income-driven repayment, so to make those qualifying payments you know, of the 120 months, which means that you're paying a percentage of your income.

Now, I will say that under SAVE, which is the newest income-driven repayment plan, that payment is pretty low, even if you're making quite a bit of money. It's 5% of discretionary income. And they've made it extremely generous. So, it is possible to get off, but that's the trade off, right? So, you're paying a percentage of your income for 10 years, you're making less money. And then, at the end, your loan gets discharged.

Host: Okay. Can you spend just a little bit more time on that? You brought up the income-driven repayment plan program. Can you walk us through that? And you also mentioned the new SAVE Program. For an OMS listening to this podcast, can you go through the steps again of what that is and what they need to do?

Jacque Chevalier Mosely: Yeah. And I should start by saying that if you're listening and you haven't really yet dealt with the intricacies of the Direct Loan Program, it is immensely complicated, way more complicated than it should be. It's really, really hard to understand, and borrowers often are confused, right? So, as you know, Nelnet, we're a servicer, we exist to try and help you understand, but really it is dependent on you understanding your loan type, your own financial situation, and what repayment is best for you because we aren't financial advisors, we're just there to give you all the options.

So, with that said, I don't want to get myself in trouble here. So, income-driven repayment, like I said, originally, it was authorized in the '90s. It was intended to be kind of a last resort. For borrowers who have borrowed and whether or not they've completed, but they're not getting the bang for the buck on what we would assume a college education or post-secondary education would bring. And so, in times of financial hardship, they would enroll in what's called income-driven repayment. So their payments are capped at a percentage of their income.

The other option available is what's called standard. And standard repayment is just how much you owe, your principal, your interest divided over 10 years, 12 months per year, 10 years. So, as you can imagine, if you're making $30,000 a year, and you borrow even $50,000, that's going to be a lot of your monthly take home. So, the intent was, "Okay, we'll give you, we’ll give borrowers who are making a low income, the ability to cap their monthly payment out of a certain percentage and, therefore, it's not crippling them.” It does still accrue interest. And, you know, the Public Service Loan Forgiveness Program, the payoff is that you are, again, per what I said earlier, the theory that you're making less. So, you're paying at a percentage of your arguably what would be a lower income to access forgiveness on the back end, right?

So, to enroll, all you need to do is enroll in what's called the SAVE Plan. There have been a lot of iterations of income-driven repayment plans. There was one in FFELP. And most recently, the Biden administration promulgated a rule. It's actually being challenged in the courts right now, and we'll probably get a ruling in the next couple of weeks on whether there's an injunction. But for now, borrowers can enroll in what's called the SAVE Program. It is the newest income-driven repayment plan. Again, if you have a FFELP loan, which is an old loan for graduate school, most likely originated prior to 2010, maybe you're on a 30-year term and you still owe quite a bit, but you're paying a low interest rate. If that's an old loan, you can go ahead and consolidate that into the Direct Loan Program and then enroll in the SAVE Program, that's called the Saving on a Valuable Education, and it is an immensely generous income-driven repayment plan.

Host: Well, this is really great information, Jacque. Thank you for bringing this to our attention. So, a couple of options. Of course, there's the Service Loan Forgiveness Program, and then you were also talking about repayment plans and the new SAVE Program as well. So, there are options out there, it sounds like. So this is really valuable information.

Jacque Chevalier Mosely: One more thing for this, which I think is particularly important for this population, given how generous – assuming the SAVE program persists and withstands the legal challenges, there are two state suits from Republican AGs right now. But assuming that the plan moves forward, like I said, it's very generous. There are changes made on accrued interest, especially. So, one thing we heard from OMSs, when I was on the Hill, and I remember meeting with them and others who had residency requirements, because you are accruing interest in residency. And so, you would enroll, but the complaint was that, "Okay, well, I'm going to enroll in this income-driven repayment plan. And I’m still, you know, maybe my monthly payments are very low because I'm not earning anything on residency, but I'm on this massive balance, I'm then accruing all this interest." So, the change now is that with the SAVE Plan, that that is lessened. So, there is more of an incentive now, I would argue, for those in residency to apply for SAVE, for the income-driven repayment plan because of some of the interest subsidies.

Host: So Jacque, then what is your advice for residents and early-career OMSs who already have accumulated high student debt loads?

Jacque Chevalier Mosely: I get asked all the time, not necessarily by OMSs, but by everyone, like, "Should I count on forgiveness? Should I not count on forgiveness?" And I will say that, you know, the Biden administration is working on a kind of a plan B for broad forgiveness. So, that still yet could happen. It could not happen, but it could happen. I would bank on not having to repay the whole amount, but also not bank on forgiveness, and I know that sounds very contradictory. But what I mean by that is that I wouldn't go into repayment or kind of look at your financial future with this student loan debt as I wouldn't bank on it all going away. But I would make the assumption that, regardless of who is in power, the federal program is structured, it's convoluted, but it's structured the way it is, offering what it offers because it is the federal government and it does what a private lender would never do, right? So, there are lots of options to minimize what you repay regardless of how much you borrow. My advice would be right now to enroll in SAVE. Even if SAVE gets struck down, REPAYE, which is the predecessor to the SAVE plan, is still also very generous. And you're going to continue to see efforts. As long as Democrats are in control, you're going to see efforts to wipe out as much student debt as can be wiped out legally, or they would argue legally.

I would also say that if you're listening to this again and you have an old loan, so if you've been in repayment for a while, your loans are not held by the federal government, they are old FFELP loans, meaning they're held by a private entity, but guaranteed by the federal government, they are still federal loans, go ahead and consolidate those into the Direct Loan Program. Because if you have an old loan, under the Biden administration, they are very eager to discharge that debt.

Host: Really good advice. Jacque, thank you so much for the information and the education today. We really appreciate it. Thank you again.

Jacque Chevalier Mosely: Yeah, thanks for having me.

Host: And once again, that's Jacque Chevalier Mosely. And to learn more about AAOMS's federal advocacy efforts and participate in grassroots efforts, please visit AAOMS.org/Advocacy. And if you found this podcast helpful, please share it on your social media and don't forget to subscribe. Thanks for listening.

Please note: As of the date of this podcast being published, enrollment in the SAVE Program has been paused due to ongoing legal challenges. Visit studentaid.gov, once again, that's studentaid.gov, for the most up-to-date information on Federal Student Loan Repayment Programs.