Tune in for a chat with Dan Parks, EVP at Yrefy, LLC, about federal student loan options, insights on refinancing, repayment challenges for private student loans, and more. Learn more with this episode of #ReceivablesPodcast, hosted by Adam Parks!
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Adam Parks (00:01.41)
Hello, everybody. Adam Parks here with another episode of Receivables Roundtable. Today, I'm here with my good friend and student loan expert, Mr. Dan Parks with Wi -Refi. How you doing today, Dan?
Dan Parks (00:14.008)
I'm doing lovely. Always a good day when I get to see you, Mr. Parks.
Adam Parks (00:17.676)
Well, greatly appreciated, Mr. Parks, I always enjoy our opportunities to chat. It was great to see you recently at the TU summit learning about some of the data sets and how things are moving forward from an economic standpoint in the United States. But for today's discussion, we really wanted to talk about creating refinancing options for student loan borrowers. And I know that's
literally at the heart of what you do over there at why refi but before we jump into our topic of the day and for those that haven't seen your previous episodes could you tell everyone a little bit about yourself and how you got to the seat that you're in today
Dan Parks (00:56.208)
Great. Now with YRefi, been here for about seven years. Before that, I ran some of the larger collection agencies here in the United States since 1990. And every one of those involved working with student loans. So with the federally guaranteed student loan contracts, I've been doing it since literally 1993. Worked with every state.
Guaranteor, it's been a long road in the student loan world. I would venture to guess I've done it as long as anybody in the industry that's still currently in the industry. How's that sound?
Adam Parks (01:37.014)
I think I would definitely put you at the very top of my student loan expert list here. Because from every one of our conversations and we'll link down below the webinar that you and I did with with Andrew Black talking about the history of student loans.
Adam Parks (01:52.844)
which I even was referencing on stage a couple of times recently as we've started moving down the conversation about student loans, which I expect will be a hotter and hotter topic leading into the election in November. But, for today's conversation, really where I wanted to try and focus was on how are you creating these refinancing options for students themselves? Right. So why refi? You're there. You're building out these programs. You're providing these refinancing opportunities.
mostly targeted to the private student loan sector. But I wanted to talk a little bit about the kind of the consumer's point of view here and what it is and how it is that you're building some of these loan programs. Could you talk with me a little bit about kind of the federal student loan programs and what kind of options students have if they're finding themselves in trouble?
Dan Parks (02:44.836)
You bet. Why ReFi doesn't delve into the federal student loans? However, there's lots of options for people that are within federal student loans. And we're going to kind of go over all those things as we go. With the federal student loans, it's best just to go on to googlestudentaid .gov. That is going to give you everything else. If you are looking to change
your student loan or want to re -look at what's, don't like the payments, you don't like the length, whatever it might be, you'd want to go look into the loan repayment part in that website. And that's going to give you all kinds of options. The main one which you're probably going to want to go into is looking at the income driven repayment plans, which are IDRs, which is the main reason why most people are probably looking to get in.
Those are tied to what you make more than what you can or what you can afford more than what you are set at, which is putting people on some pretty interesting situations since those are variable rates. There's a very nice tab in there called Loan Simulator. It gives you lots of different options.
of what you can do within the federal government of getting to it basically breaks down as you Q and A of what you're looking at, where you're at with your loan, where you expect to be. It does a very good job of breaking down the options that would be with you for the law for a new loan.
Adam Parks (04:39.927)
Okay.
Dan Parks (04:42.37)
If you want to look for it, I suggest the first one, is I want to find the best student loan strategy. That's within there. Spells it all out for you. The one thing which I always want to tell people, and I know that there's places to go, know, the earnest of this world, the so -fis of this world, and they will move over your federal loan, I think most of them, to a private student loan.
Dan Parks (05:12.964)
But once you're within the federal umbrella, you got lots of different options. You can go on forbearances. You can go on, you're going to have the,
Adam Parks (05:33.272)
You have a lot more different repayment options and plans to actually participate in, right?
Dan Parks (05:36.496)
More than anything, it allows you to consolidate and rehabilitate. And that allows you, if you get behind or even defaulted, it lets you go do that. And you can do those a couple, once each, one of each for sure. And I know people that's been able to get away with getting more of those done. So it's a great way.
And why I tell people to stay within that federal umbrella because once you're on a private student loan, you default, you are defaulted. It's no different than if you defaulted on your credit card or whatever it is until you pay it off. It's sitting on your credit report. Whereas with the federal government, they give you lots of different ways and different options to get these things out. Give you all kinds of direct pay options.
Dan Parks (06:32.688)
and you don't have to go get a co -borrow or if you're go stay within the umbrella most of the time, which is huge.
Adam Parks (06:39.094)
Okay, so there's a lot of options for the federal student loan borrower to kind of work through their repayment options. So if you're already federal student loan, you're saying that a lot of consumers like to stay within that because it gives them access to all of these additional programs that they would not otherwise have access to from a private perspective.
Dan Parks (07:01.213)
And it's a fixed and it's a fixed rate, but I what I want you to understand with feral with federal loans is that When you get a federal loan, you're gonna get a fixed rate on that loan. However, it changes year to year that you're in school So let's just use one example You know one year you got one at three percent one year. You got one at four percent one a year You got them at five percent the next year. You got it at seven and a half percent
Dan Parks (07:29.316)
You don't know which, that changes every year. A lot of people always think they have it at the same interest rates, which means they don't. But with that being said, there's no variable rate on a federal loan. The only rate that it's ever going to change is the year you take out the law.
Adam Parks (07:40.108)
Okay.
Adam Parks (07:50.902)
Okay, so you're going through that change over the last couple of years as interest rates have been rising would have shown that kind of jump. Yeah.
Dan Parks (07:56.048)
It's based on the T -bill. 90 -day I believe. 90 -day T -bill and whatever that is and then I think they redo it in every July.
Adam Parks (08:03.0)
Sure, but for -
Adam Parks (08:07.886)
But after those four years, right, so let's say the student goes, you know, does their undergraduate over four years in year five, six, seven, if interest rates go to 12, your interest rate is still what it was at the point in time when you got the loan. So you're on that fixed versus that variable rate loan, which sounds like is a little bit more on the private side.
Dan Parks (08:20.57)
Yes.
Dan Parks (08:27.822)
which is more on the private side. So.
Dan Parks (08:33.274)
General rule of thumb, once you have a federal, keep it in the federal. Way more options, usually lower interest, and they will work with you better. It's just, I'm not gonna lie, it's kind of a pain in the butt to get ahold of people and go through the whole thing. You gotta educate yourselves, and I gave you some really good websites to go look on there. And a lot of it is just.
Dan Parks (09:00.6)
Walks you through it. Have you filled out? It's like worksheet. It's nice.
Adam Parks (09:03.938)
Okay.
Dan Parks (09:07.076)
So then we go to the federal, I mean the private, which is what I do. WI -REFI specializes in loans that are defaulted or distressed. So if you're on your way to defaulting or if you are defaulted, we're one of, well basically we're the only one which I know of that actually does private student loan there. However, if you're current, we want you to stay current. There is some options for you.
Adam Parks (09:15.928)
Yeah.
Dan Parks (09:36.846)
You can go, the ones, you Google anything, private student loan refinance is gonna give you a bunch of teams. If you're looking, if you defaulted, if you look at private student loan relief, that's where WIREFI comes up first every time. We'll come up on the other options also. But you're looking at your SOFIS, you're looking at your EARNES, which are the two big ones. And it walks you through there. There's a...
Dan Parks (10:05.334)
some good things and some bad things. If you are looking for a private student loan, you're going to have to be current. You're not going to have to be late. You're to have to make on time payments and then they're going to want to talk with you. Obviously, the higher the credit rating you have, the better chance that you are going to get a lower interest loan. It's no different than basically anything that you go get a car loan. You you're going to better your credit, the lower your interest rate is going to be.
Dan Parks (10:34.704)
Shorter time to default on the private student loans. It's 270 days on a federal loan or longer. On a private student loans, 120 days is a long time. can be, in some contracts they can do it even sooner. But 120 days is about the time they're going to get before they actually default you and put you into some sort of collection effort. You'll probably be getting calls before that.
Adam Parks (10:54.147)
Wow.
Dan Parks (11:04.076)
on all your private loans. Private loans are variable rates, which means they just went up. They went up during their last three or four years something fierce. And they do on the private student loans, they do offer income or interest only rates for a while.
Adam Parks (11:17.408)
Look, it's moving over time.
Dan Parks (11:33.464)
And that's the amazing thing is I had my loan with blah, blah, know, Navi and Sally Mayer, the two big ones. And my, my loan hasn't gone through. Well, you did go on an income only, I mean, interest only loan, which means you're only paying the interest and it's not going to go down. People are paying on these loans forever, forever. And it's.
It's the reason why a lot of people come to us. At YRefi, we give you a low interest loan that is for people that are defaulted and then we work with the original lender to get this thing taken care of. And they've all been very, very good about working with us. So it's been nice.
Adam Parks (12:24.846)
I would think that interest only loan is something that really does confuse the consumer because they think that they're making a... The interest only program on the loans will allow them to only be paying on the interest rate I would expect to be confusing for the consumer because they're making a payment every month like every other loan that they make that balance goes down over time but when the balance remains the same
Dan Parks (12:30.404)
Well, it's not an interest only loan, it's just something that gets down to that. Yes, exactly.
Dan Parks (12:47.599)
and it's.
Adam Parks (12:52.622)
it might cause some confusion for those that are not as financially savvy, right? Because again, we're making a car loan payment and that balance is going down over time. So I can imagine that is causing some level of confusion for some of those consumers and potentially causing them to go for a refinancing option when they realize, I mean,
Dan Parks (12:57.776)
And it does.
Adam Parks (13:19.072)
I understand why that type of option would exist similar to what exists on the federal side, right to give people more time for a life changing event to happen and allow them to get back on the right repayment plan. Any insights into you know, how much of the volume of refinancing comes from people that are confused about that?
Dan Parks (13:44.08)
We don't, by the time you're making calls to the private student loans, and I'm sure it's the same for SoFi and Ernest and like, they are confused. It's 100%. And they're feeling like they're boxed in and there's nowhere to go.
Dan Parks (14:07.42)
Amazing how many people don't even know how long it'll take for them to take off a loan at their current payment. They don't ask that question or it wasn't shared or it went over their head at the time they asked. Here at YRefi, we try to educate them on all the positives and the negatives of here's what your loan's gonna be, here's how long you're gonna be paying for it and we spell it out exactly what it is because our job is more educate people on
Dan Parks (14:35.296)
either what they have a lot of times it will sit there and say hey the loan you got and where you're at is probably where you need to be you know work with that and but if you people that are using wirefaring have already decided that they can't keep up with what they have
Adam Parks (14:43.246)
Fair enough.
Dan Parks (14:54.992)
You know, so we build all of our loans to be customer what the customer needs or wants. And we're drawing things all the way out 20 years on these things.
Adam Parks (15:06.23)
Okay, we providing them with an opportunity to bring that monthly payment down, make it affordable to live within their means or within the budget that they have today. And really, the only option you have is to extend that term. So being able to provide them. Yeah. Well, that provides that also requires a very patient investor on your side of the ball as well, because now you need to find investors that are willing to lay out these longer term loans.
Dan Parks (15:18.264)
because they're at their wits end by the time they get to oldest.
Adam Parks (15:33.251)
Which is interesting, mean clearly you guys have found some solutions for that.
Dan Parks (15:38.704)
That's what we got in business for is try to help out the borrowers because with the federal loans, there's lots of different options. What we found out to begin with is on a private student loan, once you go bad, you're back. And you could sit there and make, you could make a hundred dollar payment on your $10 ,000 loan, which obviously these are much bigger than that.
Adam Parks (15:54.264)
Yeah.
Adam Parks (16:03.534)
Sure.
Dan Parks (16:05.392)
And once you're defaulted, you're making $100 payment to that collection agency. And you're doing that for 8 point, or over 8 years. It's not going down. It's staying on your collection report as a defaulted student loan. It's not showing that you're making payments because that's not the way defaults work. Same way as on your credit card or anything else. So it gives them
Dan Parks (16:34.637)
It makes it,
very hard once you're under to get out from underneath it. And why refi gives you the chance, know, everybody get that goes and gets tries to get alone. You know, they're looking for 675 and above. You know, our average FICO scores in the 500s and because they got out of school and they had troubles taking care of things.
Adam Parks (16:41.518)
Thank
Adam Parks (16:57.326)
Sure.
Adam Parks (17:04.002)
Well, which means that you have to have a creative underwriting structure that allows you to leverage and understand other aspects of the consumer's behavior, which would explain your presence at the TV.
Dan Parks (17:11.696)
Looking for the willing to pay and the ability to pay is what we're looking for, which is a little bit different than what most. The other thing is with private student loans is if you take out a loan and you decide to go back to school, the federal government's going to work with you a little thing. Some of the private student loans don't. So you took out a loan, here's when you said you were going to start paying it, now you're going to have to start paying.
Adam Parks (17:15.425)
Yeah.
Adam Parks (17:20.504)
Sure.
Dan Parks (17:41.008)
And that happens probably more when somebody goes away from school for a year or two and then decide to go back. But once you're there, nine times out of 10, they're looking for you to begin and end on those payments. Start them. Pay them.
Adam Parks (18:01.282)
Well, it sounds like the the consumer, the students on the backside of all of this are getting that information up front. But for those that are in those private student loans, puts them in a difficult position in some instances when they're getting out of school because they don't have the same repayment options that they would have had on the federal side. There's and for those that are interested in going down the rabbit hole, you can definitely watch the webinar that we did last month talking through some of these items from that student's perspective. And you can kind
Adam Parks (18:31.228)
of see when you look at the history of student loans, where and how these things found their way to the current status. Now, Dan, it sounds like for going to like, let's say the DCS and NCBA conferences through the end of the year, you're out there actually working with the creditors and those on the collection side in order to identify those students can help, right?
Dan Parks (18:54.302)
Mm -hmm. Because they're the ones that are holding onto the loans. They're the ones that are holding onto it. They're trying to get them collected. They're running across people that, you know, there's just so much education into the borrowers and there's so many different things out there on Reddit and anywhere else you look on the internet that's teaching people on how not to pay the bills. Well...
Adam Parks (18:59.116)
Sure.
Dan Parks (19:20.762)
The one thing which people are learning that is being a debtor is very expensive. People don't realize how expensive it is until you're on default on a bunch of loans and you try to out and get a vehicle and for the same amount money that you could get a new vehicle from the Toyota dealership, you're now getting from Fast Eddy's car lot. And if you're one day late, one dollar.
Adam Parks (19:25.581)
Thanks.
Dan Parks (19:49.552)
$1 short you're gonna find out that you cars not in your driveway It gives people a lot better chance and we found at wire refi that if we help a borrower get out from this debt They swim like hell to stay above it because they've been below the water And it's and it wasn't a comfortable situation for you know I mean the one thing which we know about everybody that we're giving a loan to at wire refi is that they don't they didn't pay their bill
Dan Parks (20:20.334)
You know, so we have to reteach them. And the way we do it here is we do it with a lot of touch. do, we, a lot of everybody else on loans, the end thing is now is get them a loan. Don't ever even talk to the borrower, them fill out the paperwork, them go there. We know that that didn't work. So we're taking them by the hand, answering all their questions, over -communicating.
Adam Parks (20:20.759)
Fair enough.
Dan Parks (20:48.716)
And once we get them the loan, we're over communicating with them there too. Because we know if they get out of sight, out of mind, they don't pay. And we're trying to create these. And I think that by doing this, it creates good habits instead of the bad habit of trying to hide and run. We now are, okay, let's go. Here's where we're going. Here's where we need to go. What can we do to help?
Adam Parks (20:58.764)
Yeah, fair.
Dan Parks (21:15.94)
Give us your circumstances and we work with each and every one of the borrowers pre and post.
Adam Parks (21:23.596)
I love it. It sounds like you guys are doing some amazing things over there for the consumers and obviously helping your investors in the process as well finding that perfect balance of the win win relationship.
Dan Parks (21:35.288)
We also educate them on the federal loans as much as we can. We point them in the right direction because obviously most of people that we have a private student loan with already have federal student loan. And we point them in the right direction, give them those websites which I gave you, and follow up with them and answer any questions that we can ask. But we definitely want them to be speaking to the right people in the federal government.
Dan Parks (22:03.62)
that can help them get things. And they've got, came up with a lot of different products, especially recently. Also, when you get a federal student loan, you got the chance of having it forgiven. It doesn't happen as much as you think, but, but, but, and so everybody reads these headlines and they think that everybody's forgiving these student loans. And it's just not the case. It's just not the
Adam Parks (22:24.59)
Yeah, I mean, looking at some of the information on student loan borrowers, and you can take a look at the podcast I just did with Dan Simmons from TransUnion where we talked about kind of what we're starting to see from an economic standpoint when it comes to student loans. And if I remember the numbers correctly, was 52 % of students are currently paying on their student loans leading into the
Adam Parks (22:46.67)
called the great reset of 2024 in October when delinquencies can start being reported. So I believe we're expecting to start seeing this flood of accounts starting to hit credit report January, 2025.
Dan Parks (22:59.65)
it's gonna get interesting it's gonna get interesting they're all gonna start out current but they're all you know
Adam Parks (23:06.19)
That's why I called the great reset, right? Because it's currently in progress right now. And even though they may be delinquent over the last year, even though they were due, we're seeing this other great reset yet again, from a student loan standpoint, but I still struggle to believe that they're going to start collecting on student loans 30 days before an election cycle. I just don't see that as realistic. So I think we'll see how things unfold.
Dan Parks (23:26.256)
would expect that to be put off. I would expect that to be put off for until the next quarter. They put things off at a quarter at a time. would, if I was a gambling man, which of course I'm not, I would bet everything I have that that will probably get put off until the first quarter of 2020.
Adam Parks (23:30.72)
I would expect a punt on this one as well.
Adam Parks (23:49.25)
High probability, high probability. I look, I'm not a political pundit here, but I just kind of trying to foresee the future here. Let me look into my crystal ball. But Dan, really, thank you for coming on and having another chat with me today. I really do appreciate all of our discussions. I've learned so much about student loans over the past couple of months as you and I have started having these chats.
Dan Parks (24:10.159)
The wind.
Adam Parks (24:10.434)
For those of you that are watching, if you have additional questions for Dan or myself, you can leave those in the comments on LinkedIn or YouTube. Or if you're gonna be at either the Debt Connection Symposium Conference or the National Creditor's Bar Association Connect Conference, you can reach out and talk to Dan directly face to face at one of those shows and learn a little bit more yourselves. I can tell you, if you ask the right questions, you can get a lot of great answers out of Dan.
Dan Parks (24:30.702)
D part.
Dan Parks (24:37.636)
dparks at wirefi .com or you won't be hard for me to have a conversation. I'd love to discuss this especially with people in the industry. Explain what's really going on with student loans because there's a lot of miseducation of what is actually happening and how it's.
Adam Parks (24:56.906)
I agree wholeheartedly and I appreciate you educating both myself and the industry on student loans. For those of that are watching though, thank you so much for your time and attention today. We really do appreciate you watching and we'll talk to you all again soon. Thanks everybody. We'll talk to you soon.
Dan Parks (25:12.176)
Thank you.
About Company
Yrefy, LLC is a national specialty consumer finance lender, focusing explicitly on distressed private student loans. Our proprietary credit and risk tolerance model allows us to lend to the underserved, lower credit tranches. With Yrefy, student borrowers achieve financial independence and realize their financial goals.