Journal of Financial Planning: March 2023
Who: Adam Minsky
What: Founder, Law Office of Adam S. Minsky
What’s on his mind: “Too often I think people think that all loans will be eligible for income-driven repayment or loan forgiveness. That’s not true, particularly for Parent Plus loans and private student loans.”
How did you come to be a student loan attorney?
I graduated from law school 12 or 13 years ago, and I had student debt myself. Most of my classmates and friends have student debt. We graduated at the tail end of the Great Recession, so it was a difficult job market. I was lucky enough to have a job, but I had an issue with one of my own student loan servicers, and I was finding it difficult to navigate. There was no one out there to help me. I wound up figuring it out on my own, but in the course of that, I recognized that there’s [no one] providing any sort of professional assistance to borrowers. So I started what essentially was a part-time side business, just counseling friends, friends of friends. That eventually grew into a full-time practice.
Can you describe what kind of cases constitute your practice? What are you dealing with for your clients on a day-to-day basis?
Most of the clients will fall in one of three very broad categories. One type of client is just someone who has a lot of student debt, usually federal student debt, and they’re looking for guidance and assistance understanding their options, managing their loans, and trying to figure out what programs they qualify for. There are so many different types of programs when it comes to federal loan repayment, loan forgiveness, discharge, and they’re always changing and, especially in the last few years, [there are] temporary waivers and one-time initiatives. Trying to understand what you can benefit from and what route is best for you and how to go about doing that and how changes might impact you, whether that’s external changes or personal changes like changes to jobs or marital status—all of that can get really confusing to navigate. Plus, we have the servicing system where people are sometimes given misinformation or incomplete information. So a large portion of my practice is counseling people on their options and then helping them get to wherever it is that we want them to be.
Another type of client is someone who is having some sort of problem or dispute. Maybe they applied for something, and they were improperly rejected or there was an improper decision. A third category of people are those who are having some sort of trouble. They’re in distress—they’re not able to afford the payments. Maybe they’re behind, they’re in collections, or they’re disabled and they can’t pay their loans anymore, and I help people deal with those issues.
Under the existing framework that we have, what can people do when they need help?
If you have mostly federal loans or all federal loans, and they’re in good standing, it’s just a matter of trying to understand what programs are out there and what you qualify for. Some big ones are income-driven repayment plans, and there are multiple types of plans, each with their own criteria and formulas and pros and cons. There’s a new version of the plan that was just recently announced by the Biden administration that might be better for some people. There are various loan forgiveness programs, including Public Service Loan Forgiveness and Teacher Loan Forgiveness. For borrowers who were defrauded by their schools, [there’s a program] called Borrower Defense to Repayment. So it’s a matter of figuring out what you might qualify for, and then what you have to do to get that relief. Sometimes that’s a simple application; sometimes that’s something a bit more complicated.
Do you work with financial planners on finding the right approach to student debt repayment for their clients?
I definitely have a lot of relationships with financial planners. I don’t work directly with them in the sense of sharing clients or anything like that, but there are certainly plenty of opportunities for cross referrals, especially for people like doctors and lawyers and other professionals who are trying to deal with large amounts of federal student loan debt. It’s not uncommon for someone to work with me for some assistance in crafting a plan, [and] then they can integrate that into their larger financial plan with their adviser. So that’s a common area where I think we can complement each other.
With the Biden plan that is currently on hold and the political discourse in general, where everything is so divided, what’s your expectation for how wider loan forgiveness will shake out, if it ever does?
First of all, there are a lot of different initiatives, and I think a lot of the debate is centered on one plan, which is the one-time debt cancellation plan of up to $10,000 or up to $20,000 [for Pell Grant recipients] in student loan debt. That’s the series of lawsuits that are now going before the Supreme Court. But there have been plenty of other initiatives as well, including the limited PSLF waiver that expired last fall, which provided billions of dollars in relief. There’s the IDR account adjustment, which is similar to the waiver but for folks who need income-driven repayment. That’s just starting to ramp up. There’s the Fresh Start initiative to get borrowers out of default automatically. There are group discharges available for borrowers who were defrauded by chains of for-profit schools that collapsed. And there’s more, I could keep going.
The bottom line is the system has been a mess, and for folks who have been stuck in the system, many will tell you how completely unfair it is. You can be doing everything right and wind up paying multiple times the amount you borrowed, not only because of interest but because of the way that these programs tend to work and how they penalize people; people who thought they were on track for a particular program and then found out years later that they actually weren’t because there was some loophole or some problem that no one ever told them about and there was no easy way for them to find out what was going on. A lot of people that I meet with, some are frustrated and some are hopeless because they’ve been dealing with this for years and years and years and they feel like they can never get ahead. I think what the Biden administration is trying to do is use the tools that are available to them under existing statutes and the regulatory process to try to provide as much relief as they can. It’s an imperfect approach because they have only certain tools at their disposal. Those tools are working for a lot of people. There’s already been tens of billions of dollars in relief already provided.
The one-time cancellation program obviously is arguably the broadest and the most controversial, and that ultimately is going to go before the Supreme Court. Whether or not that’s going to be upheld by the court or not is anyone’s guess.
Is there anything that you wish people knew ahead of accepting a student loan award package?
The big one is the distinguishing features of different types of federal loans. There’s a big difference between federal student loans that are issued to the student directly versus federal Parent Plus loans that are issued to the parents versus private student loans, which are not federal at all and often have a cosigner. Too often I think people think that all loans will be eligible for income-driven repayment or loan forgiveness. That’s not true, particularly for Parent Plus loans and private student loans. There are just a lot fewer options to manage them, and people are shocked when they call their lender and they’re told, “No, you don’t really have any really good options here except to pay these payments that you can’t afford.”
The other thing is how interest [on a student loan] works and the role of interest subsidies. Over the course of the last couple of decades, one of the big problems is that the government has gradually phased out so-called subsidized loans. They do exist still, but they’re an increasingly rare type of loan where interest doesn’t accrue during certain periods, like when you’re still in school. I think people are surprised that by the time they graduate, whether that’s an undergraduate or graduate degree program, they owe so much more than they started with because we’ve whittled away the subsidies that are provided for federal student loans, so people start off behind before they even are ready to enter repayment.
Do you have any final thoughts to want to share with financial planners about student loan debt and how they can help their clients?
The best thing you can do is be up to date on the program that exists. If there’s one mistake that I think financial planners sometimes make, it’s being a little bit too enthusiastic about refinancing loans. It’s not just about the interest rate—although clearly that’s one important piece of the puzzle—but too often I have seen people who have refinanced federal loans into a private loan, and now they’re locked out of all these programs and initiatives that they might have qualified for. There’s no way to undo that, so I think people have to be really careful about advising folks to do that.