Public Service Loan Forgiveness: Temporary Waiver and an Oct. 31 Deadline

As the “Breathing Room” name implies, this blog is intended to offer you a break from life’s deadlines, stressors, and workloads, and give you a chance to take a breath, focus on yourself, and enjoy.  But, if you….

  1. Have federal student loans
  2. Are employed by any type of government or nonprofit organization
  3. Want to qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, and
  4. Want to make sure you receive maximum credit for your participation,

don’t take a break quite yet.  Now is the time act before the October 31, dare we say it, deadline.

The Public Service Loan Forgiveness Program (PSLF), was created to increase the applicant pool for government and nonprofit jobs. PSLF is a federal program designed to provide an incentive to attract job seekers to employment in much needed, but often lower paying, service work. A component of the 2007 bipartisan College Cost Reduction and Access Act, PSLF promised to forgive the outstanding federal student loan debt for qualifying workers once they have made 120 monthly payments. However, the program was created without a clear, long term plan for implementation. With legislative and executive branch turnover, problems arose.

Public Service Loan Forgiveness had strict qualification requirements (which you can read about here,) and required specific action steps (which you can read about here,) to maintain that qualification.  However, once eligibility began in 2017, many individuals had their PSLF application rejected because of missed requirements, poor guidance, and misunderstandings. Many fixes were implemented over the ensuing years.

PSLF Waiver. In late 2021, the US Department of Education announced a short term PSLF Limited Waiver. As the name implies, the Waiver, which is set to expire on October 31, 2022, waives many of the original qualifying requirements. For a limited time, payments made under the wrong loan type, payments made late, and payments made prior to a new consolidation all count.  Additionally, educators who receive teacher loan forgiveness can count their qualifying time towards PSLF, and active-duty service members can count months of deferral or forbearance toward their 120 qualifying payments.

What, specifically, has changed for the Temporary Waiver until October 31? Here are a few of the major items:

Consolidated loans. Previously, consolidating student loans restarted the 120 payment count. Under the Waiver, payments made prior to the new consolidation loans now count.

Loan type. Under normal PSLF requirements, only payments for Direct Loans counted. Through the Waiver, borrowers receive credit for payments made on FFEL or Perkins loans as well. But, they MUST be consolidated into a direct loan before the October 31 deadline.

Teacher Loan Forgiveness. Teachers have their own loan forgiveness plan which provides limited dollar forgiveness after five years. Normally, outstanding loan balances would then also be eligible for PSLF after another 120 months. The Waiver allows those two time periods to run concurrently, and payments made during the teacher forgiveness window now count toward the 120 PSLF months.

Payment Plan. Payments made under graduated or extended payment plans are now accepted under the Temporary Waiver, but the loans must be consolidated into an income-driven payment plan prior to the October 31 deadline.  

Late and Partial Payments. Previously not counted toward the required 120, late and partial payments are now being retroactively added to the total needed to qualify. This should be done automatically, but borrowers should check. Similarly, certain periods of forbearance or deferment now count. This is a particular benefit to active duty military members.

This post is not a comprehensive list of changes under the Temporary Waiver. Check with your servicer, read through the government-provided information at StudentAid.Gov, complete the required forms and other actions by the October 31 deadline.

Then, breathe!

Confused About Crypto?

If you find cryptocurrency confusing, you are not alone. Cryptocurrency, “crypto” for short, is a form of money, or currency that only exists digitally. Crypto got its name because transactions are encrypted with complex digital codes sent over powerful computer networks. It is used very differently than other common currencies, such as the dollar, euro, and peso. However, comparing crypto to a common currency, such as the dollar, makes it easier to understand. 

Consider what gives a US dollar value. A dollar has value because it is an accepted means of buying and selling, particularly in the United States. A dollar buys a dollar’s worth of goods because the government says so. This is called fiat. The government supports the dollar’s value, and our Central Bank, the Federal Reserve, helps regulate the value. A dollar bill is simply a piece of paper that represents the ability to buy, but has almost no value in itself.

Cryptocurrency, on the other hand, is a peer-to-peer version of cash. Presently, it is not issued by a government and is primarily unregulated. Like paper dollar bills, the units of cryptocurrency have no value by themselves. It is a way for money to be sent between individuals without it going through a bank. The people that own it, use it, and trade it, determine its value, and the major cryptocurrencies have their value reported daily in financial news sources.

There are many available cryptocurrencies. Some of the more familiar names are Bitcoin, Ethereum, Dogecoin, and Tether. Bitcoin has the highest value in circulation.  Ethereum is second in total value.  At the time of this article, each Etherium unit has a much lower value than Bitcoin but there are many more in circulation. Dogecoin started as a joke between a couple of friends, and quickly became popular sue to social media. Tether is considered a stablecoin and named after its mission to tether its value to a standard currency.

Currency is what makes trading easy. In the US, we trade dollars for the items we buy. Using money to buy things means we don’t need to barter, and it is easy to determine value. We understand what it means when a box of mac-n-cheese costs $1.00, a book is $15.00, and a car sells for $15,000. 

The best way to explain how cryptocurrency works is with a simple and fun illustration. 

Suppose there are three individuals, Lamar, Olivia, and William. Lamar sells llamas, and wants to buy oats to feed them. Olivia sells oats, and wants to buy a wagon to carry them.  William sells Wagons, and wants to buy llamas to pull them. Instead of trying to barter or using their government’s established currency, they decide to create a new cryptocurrency among themselves that they can use to pay each other over the internet. They name their new currency “logancoin,” after their product types, and decide at that time that each logancoin is worth one llama, or 20 wagons, or 100 bushels of oats. As the value of llamas, oats, and wagons change, or new products are added, the value of logancoins would change. Then each can decide how many logancoins, or fraction of a logancoin, each product is worth to them. That is the general idea behind cryptocurrency.

Why is cryptocurrency so frequently in the news? Crypto is a relatively new form of currency. New currencies, and the technology that supports them, are constantly being created and rules are changing.  Crypto’s appeal has risen and fallen many times since it was introduced in 2009. The more people and business accept these digital coins as payment, the more popular these currencies become. Demand increases what people are willing to pay for each digital coin. The opposite is also true. Events such as scams, hacking, and illegal activities diminish demand as investors sell their coins and leave the networks. Cryptocurrency has quickly evolved into more of a speculative investment than a means of exchange. It will be interesting to see what the future holds.

Gambling and Your Mental Health

May is mental health awareness month. The association between poor mental health and problem gambling is not frequently addressed, so let’s talk about it.

First of all, not all gambling is problematic. Controlled gambling can be a source of entertainment or social activity. However, gambling can become an addiction that requires professional intervention with a focus on recovery. Millions of Americans, and their loved ones, are impacted by problem gambling.  The good news is that recovery resources are plentiful and widely available.

What are mental health risk factors for problem gambling?  Mental health challenges such as depression, substance abuse, and anxiety are often associated with problem gambling.  Additionally, those people with attention-deficit/hyperactivity disorder (ADHD) and obsessive-compulsive disorder (OCD) are also at elevated risk of developing a gambling addiction.

On the other hand, problem gambling can worsen or complicate mental health challenges.  Complications of problem gambling increase levels of stress, anxiety, depression, and even thoughts of self-harm and suicide. 

How do I know if I, or someone I care about, has problem gambling challenges?  Gambling can be an addiction, and those who suffer from it often attempt to hide the addiction.  Signs include preoccupation with gambling, irritability or restlessness when cutting down on gambling, chasing losses, asking for bailouts, and resorting to theft or fraud for gambling money. Similarly to those with substance addictions, people with a gambling addiction have difficulty cutting back or stopping.

How can I help?  Problem gambling addiction can happen to anyone.  It is not a financial issue, so providing funds or paying off debts will not aid in recovery.  A gambler must WANT help.  Assistance and resources are available on the web from the Maryland Center of Excellence on Problem Gambling and mdproblemgambling.com, and by phone at 1-800-GAMBLER. These sites provide help for gamblers themselves, loved ones, treatment professionals, and clergy.

Gambling becomes problematic when it compromises personal relationships, work, and resource management.  Problem gambling can result in severe financial and personal loss.  If you or someone you know faces gambling challenges, know that help is available and recovery is achievable.

Investing Basics: Buy Nikes, or Buy Nike? 

Which would you prefer to own: a pair of Nike Air Jordan Deluxe Year of the Dragon™ shoes, or some of Nike Corporation? There could be many reasons to select the shoes. Clothing is a necessity, and if you play a sport, having the right footwear can help performance and protect from injury. Shoes might be desirable for the image they project or the way they look you wear them. Nike shoes could even be considered a collector’s item. But if you have an investing mindset, you might consider owning a piece of Nike Corporation instead. 

Let’s discuss what that means.

Investing is buying something with the expectation that it will make money for you, usually by increasing in value.  You won’t have the actual money to spend until you sell your investment. Investing is different than saving money. Saving is setting aside money instead of spending it, so it can be used for something later. Savings are usually safe and available when you need money to spend.

How can someone who is not a billionaire buy Nike Corporation? The answer is to buy Nike stock. Most large corporations are publicly owned, meaning individuals can buy and sell pieces of ownership in them. The ownership is represented by shares of stock.

Companies need money to grow. One way to raise this money by issuing and selling shares of stock.  They use the money to build new factories, develop new technology, hire more workers, and buy more resources for making products. Stocks in large companies, such as Nike, are traded on the stock market.  Anyone can open an account with an investment company and request to buy and sell stocks. 

Now let’s compare buying Nike shoes to buying Nike stock. The Air Jordan Deluxe Year of the Dragon was introduced around February 15, 2012. Depending on the seller, the shoes could be purchased at an average of approximately $290. The shares of stock were selling that same day for $23.70, so 12 ¼ shares could be purchased for the cost of the shoes.  Ten years later, the same shoes new could be sold for $200, but the stock was worth $1,777! 

ChoiceMoney Spent February 15, 2012Value February 15, 2022 (average)
Buy Nike Air Jordan Deluxe Year of the Dragon™ shoes$290$200
Buy Shares of Nike Stock Instead (12 ¼ shares)$290$1,777

It is important to know that buying stock can be risky, and shares can decrease in value. Shares can even become worthless. It is important to research and select stock purchases carefully. Nike was used in this example because it is a product that people like to buy. That is a good consideration when choosing an investment. 

Wise investors understand the company that they are buying, as well as their products or services. 

Building Wealth with Extra Cash

Tax season is over for most.  Maybe you’re looking forward to a refund check, or have already received one – what will you do with that cash? Are you ready to think about investing that money so it can grow for you?*  

Investing for wealth growth is a different mindset than putting money into savings. Both are important.  Having emergency savings for sudden or unplanned expenses, and planned savings for anticipated purchases, are both smart financial strategies. However, investing is a method of building wealth over the long term so that some of the money you have worked for actually works for you.  

There are many ways you can invest. Some common examples are financial instruments such as stocks, bonds, and mutual funds. You can also invest in real estate by purchasing a home or rental properties.  Some individuals invest in tangible goods, like art, coins, or antiques. Starting and growing your own business, or helping to finance someone else’s business are also considerations.  

How can I have enough money to invest? The key to building wealth is to earn enough to cover expenses and savings goals, with enough left over to invest. The good news is that you don’t need a lot of money to start an investment plan. Many financial institutions allow you to open a small account and start investing by buying one stock share at a time, or in small dollar increments. 

Regardless of the investment, there are several questions to ask yourself before investing your money.     

1. How much risk am I comfortable with? Risk is the possibility that the value of the investment can decrease, or increase less than expected. Investments carry different levels of risk, and someone who is uncomfortable with risk should pay careful attention to their choices.  Unlike a bank savings account which is insured against loss, investments can decline in value.  

2. How much time and research are you willing to put into your investment strategy?  Rental real estate and collectibles can require a significant amount of time and skill. A beginning investor might want to consider an index mutual fund, a collection of stocks chosen based on widely used stock indices. Mutual fund managers take care of the investment selections, and the fees are fairly low.  

3. How much do you want to be personally connected to your investments?  A family home, art, or collectibles can bring enjoyment and fulfillment which cannot be measured in dollars. Owning rental property often means managing repairs and negotiating contracts. These are both very hands-on, as opposed to stock investments that can be managed by a financial professional.

Investing can be rewarding and challenging. It is important to research choices thoroughly and be comfortable with risks. Despite the risks, building wealth opens up opportunities for your future and the future of your family. It can expand your ability to start a business, feel financially secure, travel, give to charity, pay for education, and provide for the next generation.

Learn more about UME’s financial wellness programs at https://extension.umd.edu/programs/family-consumer-sciences/financial-wellness.

*This article is for general information and not intended to be investment advice.  For guidance about creating a personalized investment plan, please consult a licensed investment advisor. 

Taxes 2022:  Extra (Child) Credit

Tax refunds are one of the largest checks many families receive in a year, and the child tax credit could have a large impact on the size of that refund.  As part of the 2021 COVID relief packages, many updates were made to the child tax credit.  These changes were designed to help families with children during difficult economic times. Now that the tax return deadline is approaching, there are a few important  things to know about the credit.   

The maximum benefit could be higher on your 2021 tax return than in previous years.  The new measures created an Enhanced Child Tax Credit. Eligible parents can receive $3,600 for each child under 6, and $3,000 for each child under 17 on their 2021 tax returns, which are due April 15, 2022.  Previously, the credit was $2,000 per child under the age of 17.  The enhanced benefit phases out for single filers who earn over $75,000, heads of households earning over $112,400, and married couples who earn more than $150,000.  The existing benefit is still available for higher earning parents, and phases out for single filers earning more than $200,000, and married filers earning over $400,000.   

If you received part of your enhanced child tax credit in monthly payments during 2021, your tax refund will be smaller. As part of the COVID relief American Rescue Plan, parents could receive up to $300 each month of their credit from July through December.  Unless parents opted out of these monthly payments, this will reduce the remaining credit amount on your tax form.  The expected tax return payment could end up lower for these families.   

There are a few other tax planning considerations.  First, the enhanced child tax credit is only available for 2021.  Unless new legislation is passed, the maximum child tax credit will revert back to $2000 per child in 2022.   Second, divorced parents who share child custody could have received more than allowed under custody agreements, and discover they need to pay back funds received. Most importantly, however, make sure you file taxes, even if your income is below the minimum threshold for filing.  You can still be eligible for the credit and will receive a check, even if your income for 2021 made you exempt from paying income taxes.

Especially for Teens – Let’s Talk about Gambling

March is Problem Gambling Awareness Month, so let’s have a serious talk about gambling. And by gambling, I’m referring to the activity of betting: the practice of risking money or other valuables in a game or bet. Gambling is taking on a risk with the hope of an uncertain gain. Some examples of gambling are betting on sports teams or card games for money, playing the lottery and using online gambling sites. 

Why do people gamble?  Gambling can be a form of fun or entertainment. Some teens only gamble during games among friends, and keep the risk low by using only tokens, treats, or small change. The activity of gambling is not necessarily a problem, as long as it is managed well.     

Why is this important?  Evidence indicates that about 6% of teens under the age of 18 have a serious gambling problem. That doesn’t sound like a lot of people, but what that means is that in a class of 30 people, 1-2 of your classmates are facing this challenge. About 80% of youth have participated in some form of gambling, and 10-15% are at risk of gambling becoming an addiction.  

How can gambling become a problem?  Gambling can become risky in several ways.  One is when it becomes obsessive. The reality of gambling is that you are much more likely to lose money than you are to win. Over time, very few people come out ahead financially with gambling. However, after losing money, the common reaction is to “play again” in an attempt to win back losses. This almost never works. Instead, more money is lost.  

Gambling also becomes a problem when it starts to become addictive. Gambling can actually activate the brain’s reward system, much like addictive substances. Someone with a gambling addiction feels a need to continue gambling. 

What happens when gambling becomes a problem?  People experiencing gambling challenges put their future success at risk. Instead of having money to reach life goals and pay living expenses, it becomes lost to gambling organizations. People addicted to gambling sometimes resort to stealing from friends and family, and often start to suffer from depression and poor health.  

What can you do?  Nobody intends to have a gambling problem, or hurt themselves, their friends, and their family. If you or someone you care about is facing life challenges caused by gambling, talk ASAP to a trusted counselor. Confidential help is available on-line, or by calling 1-800-GAMBLER. 

Financial Influencers in Your Home

When we hear the word “influencer,” many of us think of people with large social media followings who use their prestige to sell products and services.

What do you think has the greatest influence on our money habits?

  1. TV and movies
  2. Friends
  3. Parents
  4. Social media

If you answered 3. parents, you are correct! While media and friends do influence our money choices, our parents have the most profound impact on the attitudes and values we hold concerning money. This influence begins early in childhood. 

What does this mean? First of all, “parents” in this case does not only refer to biological mom and dad.  It means the people who are doing the parenting – those who have taken responsibility for raising the child. These are the biological parents, step parents, foster, or adoptive parents, grandparents, or other family members. 

Secondly, it means that there are many ways that children learn from their parents about money. The two primary ways are through our explicit actions and through our implicit example. The characterization of learning as implicit or explicit simply refers to the parent’s level of intentionality.

Implicit, sometimes called vicarious learning, occurs when a child’s attitudes and behaviors about money develop through observation. Some examples of how this might happen include when a child sees a parent’s charitable giving, watches a parent compare prices while grocery shopping, notices a parent’s stress while paying bills, or hears money related arguments between parents. More in general, a child may learn through these implicit scenarios by observing parents’ money management practices and absorbing the level financial of well-being expressed by the parent.

On the other hand, explicit learning occurs through direct experience with money. Perhaps this happens when a parent provides an allowance and guides the child in spending. An older child with a new job might learn budgeting by sitting down with a parent to discuss spending and saving priorities. Just like implicit learning, it could also happen during parent child grocery trips, if the parent actively demonstrates the process and skills needed to compare prices and provides opportunity for the child to try. Explicit learning also occurs when parents engage their children in discussion about money values or provide direct instruction about financial products. 

Lastly, for parents, this means that your actions are being noticed, and your lessons are being remembered. It is important to be purposeful in teaching children money skills so they can more successfully manage their money when they enter into adulthood. Take them shopping with you, show them how to make good decisions. Tell them about your successes and your mistakes. If you are unsure about your own money skills, University of Maryland offers personal finance workshops for both youth and adults. For additional workshop information and tips, contact your local Extension office, check out Extension’s Financial Wellness pages, and follow the financial Facebook and Instagram accounts.