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Student Loans and COVID-19 Loan Suspension

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by Nurse Beth Nurse Beth, MSN (Columnist) Educator Writer Innovator Expert Nurse

Nurse Beth has 30 years experience as a MSN and specializes in Med Surg, Tele, ICU, Ortho.

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Are You Struggling to Pay Your Student Loans?

It's a very hard time financially with nurses being furloughed and called off. Here's an explanation of the the recent student loan relief in the CARES act.

Student Loans and COVID-19 Loan Suspension
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Student Loan Deferment

Many nurses are struggling to meet all their bills, including student loans. The CARES Act, passed on March 27th, 2020, was the first major stimulus bill in response to the COVID-19 pandemic. For federally-held student loans from March 13 through September 30, 2020, in addition to stimulus checks for eligible persons, the bill suspended all:

  • student loan payments
  • interest  
  • bill collections 

Payments can be made during this time (March 13-September 20) but the choice is optional. You can make no payment, or you can choose to make a payment smaller than your original payment without penalty during this time.

Eligibility: Federally-held versus federally-guaranteed student loans

The keyword is federally-held student loans.This is a confusing term. Federally-held means owned (funded) by the government (US Department of Education). Most borrowers don’t know whether their loans are federally-held or federally-guaranteed. Federally-held means the government owns the loan. 

Federally-guaranteed means the government guarantees a commercially held loan. An example of a federally-guaranteed loan are some Federal Family Education Loans (FFEL) and Health Education Assisted Loans (HEAL) owned by commercial lenders. There’s a strong chance that you took out a FFEL loan if you took out a loan before 2010. Some Perkins loans are owned by the institution attended. These loans are not eligible for this benefit at this time, but you can contact your servicer to ask about what benefits may be available.

How do I know if my loan is federally-held?

To find out if your loans are federally-held, visit FederalStudentAid.

You can also contact your servicer. Use this link to contact your servicer  to determine if your loans are federally-held.

How do I find out who my servicer is?

The entity to which you make your monthly payment is your servicer. If you do not know who your servicer is or how to contact them, go to  FederalStudentAid or call 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing-impaired 1-800-730-8913) for assistance.

When talking to your servicer, remember that call centers are impacted and you may talk to a worker who is scrambling to get the most recent information. Be patient and make 2-3 calls to make sure the information you are getting is consistent.

Make sure your contact information is up to date in your service profile. Servicers will contact borrowers in August about reinstating payments.

To reiterate, these loan relief programs apply only to federally-held federal loans. They do not apply to FFEL-program federal loans and to Perkins federal loans not held by the government, nor do they apply to private student loans.

Zero Interest Rate

From March 13, 2020, through Sept. 30, 2020, the interest rate is set to 0% on the following types of student loans, but only if they are federally-held student loans :

  • Defaulted and non defaulted Direct Loans
  • Defaulted and non defaulted FFEL Program loans
  • Defaulted and non defaulted Federal Perkins Loans
  • Defaulted HEAL loans

You will not accrue interest during this 6 month time frame. If you are able, make payments, because the full  payment will go to the principal provided the interest accrued prior to March 13th is paid.

What can I do if my loan is not federally-held?

  • Consider refinancing and consolidating your student loans now, while interest rates are low 
  • Consider asking for an unemployment deferment if you have been cut to 30 hours or less per week and your loan is not defaulted.
  • If you are having difficulty making payments, contact your servicer to make arrangements, such as a payment plan based on your adjusted income.

Future Relief

There’s speculation and hope that loans will be wholly or partially forgiven, but be on the safe side and assume that you will be responsible for your student debt once the 6 month period passes. There are no guarantees.

There are other relief bills being introduced.

Student Loan Forgiveness Bill

The Student Loan Forgiveness Bill, introduced by Rep. Carolyn Maloney (D-N.Y.) on May 5, would establish a program within the Departments of Education and Treasury that would forgive all public and private graduate student loans for health care workers who have made significant contributions to patient care, medical research, and testing during the COVID-19 national emergency. 

HEROES Act

There is another big bill in the works by Nancy Pelosi, called the HEROES Act. It  would extend these protections for an additional 12 months to September 2021, and be extended to commercially-held FFEL program federal student loans and Perkins loans, which were excluded from the CARES Act. The passage of this bill is not at all guaranteed, and has even been called “dead in the water” by Republicans. 

Hope this info helps those with student loans.

Best wishes,

Nurse Beth

Hi! Nice to meet you! I love helping new nurses in all my various roles. I work in a hospital in Staff Development, and am a blogger and author.

19 Followers; 110 Articles; 237,280 Profile Views; 2,124 Posts

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42pines specializes in Occupational Health; Adult ICU.

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A warning!

Not all furloughed workers have it bad.  I know of one couple, both have been furloughed now for a number of weeks.  Both were earning about $10/hour.

State Unemployment (UE) benefits were about $250/week + the federal $600, plus their companies, in an effort to be fair, were having each work one to two days/week.  This amount of income was NOT enough to stop UE benefits, nor the Fed benefit.  Thus normally each earns about $400/week.  Now, oddly, each is earning quite a lot more, working one day a week, since 1 day does not trigger a UE reduction.

For instance formerly each earned gross $400/week

Now each is earning: 1 day ($80) + UE of $250 + Fed of $600 = gross $930.  Yes, this is double what each earned before the crisis.  

I'm not here to debate the right or wrong of this simply to point out that both in this couple were blissfully ignoring a few facts.  

Normally their gross income was $41,600.  With deductions their taxible income was very little.

Now their annualized gross income has doubled:  Their TAX obligations are now significant.

If you find yourself in such a position, I recommend that you tuck away 20% for potential taxes as we have no idea how long things such as this will continue.  Be prepared!

Worse, for this couple: The family has about $40,000 student debt which is on an income-sensitive plan.  Well---consider this!  Their income has now doubled.  Next year, the income sensitive plan will look for this years' earnings.

If this years is higher then it is very possible that mandated payments each month NEXT year will be much, much higher (actually hundreds of dollars, each month) then the couple are paying this year.  Just at a time when their income will drop tremendously--back to "normal."

Take-away: Beware of this years and next years taxes and beware of income sensitive student loan payments next year.  Be aware!  

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1 Follower; 2,549 Posts; 37,994 Profile Views

Moral of the story...there is no free ride for the working poor, only appearances.

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