Pete Buttigieg, mayor of South Bend, Indiana and presidential hopeful, and his husband Chasten Buttigieg owe over $130,000 in student debt. You might assume the money the couple will make from Mayor Pete’s rise to political superstardom would warrant just paying it off — but you may want to take a closer look.
According to Forbes, here’s what their debt looks like:
- 20 loans total, 15 of which are on an income-driven plan
- Taken out between 2009 and 2017
- Interest rates between 3.4% and 6.8%
This tells us a lot, actually. Mayor Pete graduated from Harvard in 2004 and from Oxford in 2007. That means the entire debt most likely belongs to his husband Chasten, who finished up a master’s program fairly recently.
Can politicians like Mayor Pete receive PSLF?
According to the Public Service Loan Forgiveness (PSLF) certification form, there’s nothing barring a mayor from getting credit toward loan forgiveness. Only members of Congress and employees of partisan political organizations (like the Democratic National Committee or Republic National Committee) are specifically excluded.
The way I read the form, presidents could potentially qualify, since they’re not specifically excluded by name. Fun thought experiment, right?
PSLF credit can’t transfer to a spouse, though. Since the loans probably all belong to Chasten, he must qualify with his own job. He’s a teacher at a Montessori school full time — though he seems to have transitioned to a temporary part-time role with a community theater during the campaign.
That means if the Buttigieg campaign doesn’t end up in the White House, Chasten could very well pick up where he left off with his job as a teacher.
Are the Buttigieg’s loans set up correctly for forgiveness?
Considering Chasten had debt before 2010 and that only 15 of the loans are on an income-driven plan, my bet is that he has perhaps as many as five loans from the Family Federal Education Loan (FFEL) program, since the total number is 20.
FFEL loans don’t qualify for forgiveness under PSLF unless they’re consolidated. That means only about $100k of his total $130k would qualify for the program. Even spouses of potential Rhodes Scholar presidents can make mistakes with this stuff!
Chasten should have consolidated everything immediately at graduation from his master’s program so that it was all set up properly for loan forgiveness.
Chasten will face problems getting the best repayment plan
With the debt not all set up the right way, that means Chasten is probably enrolled in Income-Based Repayment (IBR). This plan requires 15% of your income. Because Chasten’s first loan was from 2009, he should qualify for Pay As You Earn (PAYE), which is only 10% of his income.
Usually I see servicers put people on IBR instead of the cheaper PAYE if they have at least one FFEL loan (remember that consolidation would have been the best choice early on).
Also, the Buttigiegs were married in 2018. Usually certification dates for income-driven repayment programs hit in the summer or fall. That means Chasten is likely paying a few hundred a month but will have to include his husband Pete’s income for his next recertification cycle. His payment should then cap out at the same amount as the 10-year Standard plan, unless they file their taxes as married filing separately.
Obviously, to try and optimize a forgiveness program down to the last cent when Mayor Pete is under an intense media spotlight would probably be dumb. Even filing taxes separately might raise eyebrows as to why. While this example is just for fun, it shows how real it is to make mistakes managing your loans.
Could Chasten file his taxes separately from Mayor Pete?
If Chasten filed separately on $130k of Direct Federal Loans, he could use the PAYE plan and only pay based on his income alone. We don’t know what that income is, but let’s assume it’s $40,000 per year. We know Pete’s salary is $110,884.
Based on my calculations, their married filing separate penalty would be $1,398 per year, or about $116 a month.
If they had to pay 10% of a low six-figure income, that would clearly cost a lot more than just over $100 a month.
If Chasten stays on as a teacher, married filing separately makes sense. Take a look at the monthly payments I projected below. You’d have to add $100 to $200 a month to the cost if he filed separately from Pete for taxes.
How much could Pete and Chasten save with PSLF?
Let’s assume Chasten could have two years of PSLF credit so far, since he started teaching full time in 2017. That means he’d have eight years to go.
The alternative to forgiveness would be paying it all off with refinancing. Let’s assume he could get an eight-year loan at 4% interest, just to make the comparison apples to apples — though the only place that I know of that will give you an eight-year term is Earnest.
Here’s the projected cost under both options:
Not including extra taxes from filing separate, Chasten could pay $19,723 over eight years on PAYE with PSLF compared to $154,825 in principal plus interest paying everything back. That’s a savings of $135,102!
The savings would be lower if you added the tax cost of filing separate, but if Pete’s income stays below $200,000, then this tax cost should stay below $50,000. Still much cheaper than paying everything back.
Real-life considerations for the Buttigiegs’ student debt
A couple of points to make. Pete is famous enough that he’ll likely be able to make a pretty massive income. At some point, the tax penalties from filing separate would get so high at the $400,000-plus income level that it simply wouldn’t make sense to continue filing that way.
On the PAYE plan, their payments would be capped at the Standard 10-year plan, or about $1,443 a month. After eight years of payments on this plan, they would have paid $155,873 — slightly more than refinancing and paying it all off.
Also, Chasten is now working part time at a community theater while his husband pursues the presidency. To get really technical, he might consider forbearance to avoid making unnecessary payments that don’t count toward PSLF. He could also pick up another government or nonprofit part-time job to hit 30 hours a week, but that would likely not be possible with a spouse running for the White House.
That means family goals takes priority over maximizing forgiveness in this case. Chasten would also probably want to avoid any negative media scrutiny over looking like they’re benefitting too much from a generous government program.
Personal, family and career reasons should always take precedence over maximizing loan forgiveness, in my opinion. So I think it’s very likely the Buttigiegs end up pursuing a full-repayment strategy at some point, since it’s unlikely that they’ll go back to where they were in life before.
As long as Chasten doesn’t mind the spotlight, I think he made a decent financial trade in giving up student loan forgiveness for love.
What do you think about the Buttigieg student loan debt? Comment below!