Tune in as we chat with student debt expert Dr. Tony Bartels about the latest updates to the COVID-19 Student Loan Repayment Relief announced this week.
Since March 13, 2020, borrowers with federally held student loans have received student loan repayment relief. Interest rates have been set to zero percent, payments have been suspended, and for those using income-driven repayment or working towards Public Service Loan Forgiveness, the suspension time has counted towards qualifying forgiveness payments.
The entire student loan collection system was never intended to be turned off and on all at once, like a switch, so what can we expect as we head into a full year of this relief? Listen in to learn more.
In this episode we mention the following links and information:
- Federal Student Aid: https://studentaid.gov
- Federal Student Aid COVID FAQ: https://studentaid.gov/announcements-events/coronavirus
- VIN Foundation COVID-19 Repayment Restart blog post: https://vinfoundation.org/covid-19-veterinary-student-loan-repayment-restart/
- VIN Foundation Repay Wiser Tools: https://vinfoundation.org/resources/repay-wiser-veterinary-school-debt-loan-repayment/
- VIN Foundation New Veterinary Graduate Student Loan Playbook: https://vinfoundation.org/resources/class-2020-veterinary-student-loan-playbook/
- VIN Foundation Student Loan Forgiveness Planning blog post: https://vinfoundation.org/veterinary-student-loan-forgiveness-planning-preparing-for-the-tax-bill/
- VIN Foundation Student Debt Center: https://vinfoundation.org/studentdebtcenter
- VIN Foundation My Student Loans tool: http://www.vinfoundation.org/mystudentloans
- VIN Foundation WikiDebt: https://vinfoundation.org/wikidebt
- VIN Foundation Webinars: https://vinfoundation.org/resources/webinars/
- Stay up to date with VIN Foundation updates: https://vinfoundation.org/updates/
- Personalized Assistance available via the special VIN
and VIN Foundation Student Debt Message Board areas:
Email VIN Foundation: studentdebt@vinfoundation.org
You may learn more about the VIN Foundation, on the website, or join the conversation on Facebook, Instagram, or Twitter.
If you like this podcast, we would appreciate it if you follow and share. As always, we welcome feedback. If you have an idea for a podcast episode, we’d love to hear it!
TRANSCRIPT
Intro
Jordan Benshea: Welcome to the Veterinary Pulse podcast. My name is Jordan Benshea. I’m the Executive Director of the VIN Foundation. Veterinary Pulse is the heartbeat of the profession. Join us as we talk with veterinary colleagues about critical topics, from student debt to mental health, and share stories. Stories connect us as humans, as animals, as a veterinary community. This podcast is made possible through individual donors like yourself, and our technology partnership with VIN, the Veterinary Information Network. Thank you for being here.
Meet Tony Bartels, DVM: Student Debt Expert
Jordan Benshea: This episode, we’re having a conversation with VIN Foundation board member and student debt expert, Dr. Tony Bartels, about the latest updates on the COVID student loan relief. We cover what you need to know with the most recent changes and best practices during this time. Please check the Episode Notes for links and information mentioned. Thank you for listening. Welcome, Tony. Thanks so much for coming back again.
Tony Bartels, DVM, MBA: Yeah, thanks for having me! Things keep on changing with student loans, so we need to keep on talking about it.
Jordan Benshea: Exactly, exactly. I mean, there’s a lot that happened in 2020, but it looks like we’re already headed into 2021 with changes.
Tony Bartels, DVM, MBA: That’s correct.
COVID Student Loan Relief Updates
Jordan Benshea: Let’s just dive right in and share with us what’s happening with student loans so far this year.
Tony Bartels, DVM, MBA: Yeah, I think the last time we met we were talking about preparing for repayment restart, and now we’ve got some new information where we know that the pandemic relief that was in place for federally held student loans has now been extended through the end of September of 2021. So, much longer than I was expecting. Now we’ll have our student loans pretty much on pause, or at least those federally held student loans will be on pause for close to at least 18 months from the time it started to when this projected extension is due to expire.
Jordan Benshea: And has anything like this happened before?
Tony Bartels, DVM, MBA: Not that I’m aware of. So yeah, this is s some uncharted territory. As long as we’ve had student loans, I’m not aware of any other timeframe when we’ve had this kind of pause offered to borrowers. So yes, I think this is all some pretty new territory.
Jordan Benshea: Well, we’re in uncharted territory in a lot of different areas, so why not this one as well? So, what do veterinarians with student loans need to know right now?
Advice for Veterinarians in Repayment
Tony Bartels, DVM, MBA: I think for veterinarians in repayment, what I would be doing is assessing my current repayment strategy. What that strategy looked like before I entered repayment. So, what repayment plans were I using? What was my monthly payment before this pandemic relief all started? How does my budget look now? So now that I don’t have a payment due, I’m not accruing any interest, what should I be doing with that extra money, presumably, that’s in my budget because I’m not having to make my student loan payments? I know my wife and I, because we’re using an income driven repayment plan, we use revised Pay As You Earn, we’re anticipating reaching the tax that’s going to happen when our loans are forgiven, we’ve been boosting our forgiveness savings. It doesn’t make sense for us to pay anything additionally towards our student loans during this suspension period, because when you are anticipating hitting forgiveness, the most financially beneficial plan is to pay as little as your income requires and plan for the forgiveness. Right now, we don’t have to pay anything, and we’re not accruing interest, and the pandemic relief also gives us credit towards forgiveness. So, for those of us who are working towards forgiveness, this pandemic relief on our student loans is extremely beneficial. So, the longer it lasts, the more beneficial it’ll be. It also allows us to play catch up in some of those other areas of our financial wellness that maybe we haven’t been able to boost up until this point.
Jordan Benshea: And that’s for veterinarians already in repayment.
Guidance for Veterinary Students
Jordan Benshea: What about for veterinary students who haven’t even begun to pay their student? Now they’re in this whole new world, and this is going to be the new norm for them almost to an extent.
Tony Bartels, DVM, MBA: Yes. I hope so. I mean, again, now we’re going to have a second class of veterinarians who graduate into the suspension, which is probably the most confusing area, right, because it really has had kind of an interesting impact in terms of grace periods and how that ends. When your grace period is supposed to end six months after you graduate, what status is your loan actually in at that point? That’s really been the most confusing part. So, just like we’ve been recommending before the pandemic that the best course of action for most veterinarians who are graduating is to consolidate their student loans and get into an income driven repayment plan, then you don’t have to worry about what status your loans are in. You can also start that clock ticking towards forgiveness.
Tony Bartels, DVM, MBA: But for those students who maybe just started veterinary school this fall, and you don’t know anything other than 0% interest rates, I’ve got to burst your bubble. It’s probably not going to last forever. I hope it does, but it’s probably not going to last forever. You will get a full year at least or more of no interest accruing on your student loans. For veterinary students, that’s a huge benefit. Right? No matter where you are in the program, obviously, the more student debt that you have, having the interest rate shut off the bigger the impact is going to be. But for those first and second year students, having that interest turned off for a good chunk of the first half of your veterinary education is really going to also help you save a lot of money that you otherwise would have been charged an interest. So, it’s really hard to overstate how beneficial this pandemic student loan relief is for veterinary students and those of us who are in repayment.
Jordan Benshea: Is there anything that the veterinary students currently need to do, or do they just sit back and wait?
Tony Bartels, DVM, MBA: Yeah, it doesn’t affect any of your financial aid. You don’t have to request any kind of relief or anything, it’s just automatically set to zero. Your interest rates, as long as they are federally held student loans, are automatically set to zero. You don’t have any payments while you’re in veterinary school anyway, so you didn’t have to worry about that, but yeah, you don’t have to do anything to request the 0% interest rate. It’s automatically set to that lower interest rate.
Strategizing Student Loan Payments
Jordan Benshea: Now, you touched on this a little bit before, but should veterinarians or veterinary students, well, they probably wouldn’t, be using this time to pay down their loans in any way, or should they not focus on that at this time?
Tony Bartels, DVM, MBA: I think there’s a couple different ways you can approach it. It gets back to what was your repayment strategy before the pandemic started, and what your financial situation looks like now. Generally speaking, if your student debt-to-income ratio is two or higher, so if you take your student debt balance and you divide it by your income, if that number is two or more there’s a good probability that you’re going to reach student loan forgiveness. In that case, you want to pay the minimum and plan for the forgiveness. So, there’s not really a good reason to pay during this pandemic relief period. If your student debt is less than or equal to your income, that’s a different story. So, if your debt-to-income ratio was one or less, there’s a really good chance that you may pay your student loan balance to zero before you hit forgiveness. In that case, it can make sense to try to utilize this pandemic relief period to gain some ground on your student loans, because, presuming that you don’t have a lot of unpaid interest, or any unpaid interest, and the payments that you’re making are going directly to the principal, that will help to reduce your principal balance. Then when the interest does get turned back on, you’ll have a lower principal balance, you’ll have less interest accruing, it’ll be easier to get to a zero balance on your student loans. Now you don’t have to necessarily make payments now in order to have that effect. So, because we don’t know what the future holds and we’re still living through this pandemic uncertainty and this once in 100-year kind of events, I would want to shore up my emergency funds and all of those other areas of my financial wellness first. But if I did still have some extra money in my budget that I was going to put towards my student loans, I would be putting that into some kind of interest-bearing account for the time being, because I don’t have to make a payment towards my student loans now to have the same impact as if I did right before this pandemic relief period ends. So, I can build up that amount that I’m planning to pay towards my student loans, if it still makes sense to do so and my situation improves or still remains unchanged. I can build that savings, if you will, that I plan on paying towards my student loans on the side earn some interest on it between now and when the pandemic relief period ends. When we do find out if that pandemic relief period is going to end at the end of September of this year, or maybe it gets extended again, who knows, right, I’m not going to make that payment to my loans until I know repayment is going to start again. So, I buy myself some time. I get to feel out my situation and understand my finances. And if it then still makes sense for me to make that bulk payment towards my student loans, I’m going to do that right before that pandemic relief period officially ends and then we re-enter repayment. You’ll still have the same impact at that point as if you were making regular consistent payments along the way here, now.
Jordan Benshea: If someone’s listening to this and has been making payments on student loans and is now thinking, geez, that’s a pretty good idea. Maybe I shouldn’t have made those payments, maybe I should be putting that into an interest-bearing savings account or some other opportunity to increase their funds, is there a way that they can get a refund? Is that even possible on these payments?
Tony Bartels, DVM, MBA: Yes, there is in the CARES Act, the legislation that was passed and all of this is based on, allows for you to retrieve payments that you made during this suspension period. The suspension period officially began on March 13, of 2020. If you made any payment during that timeframe, since that timeframe through now or through September of 2021, you can request to have that refunded back to you. You would reach out to your loan servicer and say, “Hey, I made a payment during the suspension period. I would like that payment or a number of payments returned back to me.” Then you can choose to use that money in any way that you see fit.
Jordan Benshea: That’s probably really helpful information. I think something that a lot of people probably don’t know, because that came up actually in a webinar that we were doing recently. The woman said, “Wow, I’m going to immediately apply for that so I can get that money back.”
Tony Bartels, DVM, MBA: Yeah, I think it’s really hard to overstate how beneficial this pandemic student loan relief has been. Not only the 0% interest and no payments and the credit towards forgiveness but being able to retrieve a payment that I made during that suspension period and potentially redirect those funds to other areas of my financial wellness. I mean, it’s hugely, hugely beneficial.
Jordan Benshea: Right, right. So, what do you recommend? You mentioned that you recommend that colleagues with the money that they would be using to pay these loans save it and not make the payments necessarily, because there are ways that you can pay down your principal down the line? Is there anything else that you’d recommend that they do with the money or any other tips?
Tony Bartels, DVM, MBA: Yeah, I find that most veterinarians in repayment are either unsure or confused about how maybe an income driven repayment strategy works and whether or not they’re going to experience a tax on forgiveness. This is a great, you’ve got a ton of time here now, right? Your loans are essentially in suspended animation, and they will be for at least another seven or eight months here. You’ve got some time to look at your budget and do some projections on what your best guess of what you think your income is going to be this year and beyond and start to run simulations. So, use the VIN Foundation Student Debt Center and all the tools that are available to take stock of what your student loans are now, repayment plans that you’re in, and run some simulations. If it looks like you’re going to hit forgiveness, then start saving for it. That’s the thing that keeps me up at night, is we do so much education around how you can lower your monthly student loan payments and take advantage of income driven repayment, but I can’t make you save for forgiveness. It seems to be the thing that stresses most people out is the “tax bomb” right at the end of income driven repayment. In reality, it’s more of a tax discount, right? For those of us that are going to reach a taxable event, we’re going to pay cents on the dollar of what’s remaining. But having to actually save over a long period of time in order to prepare yourself to pay the IRS when that tax come comes due is really stressful for most folks and hard to wrap your head around. But you’ve got some bonus time here to run those simulations and estimate if and when you’re going to reach that tax and what it might be and then start saving for it. The earlier you start saving for it, the sooner you’re going to reach your target, and the more time you’ll have to adjust upwards or downwards depending on your situation and whether or not you think you’re going to reach that tax. That’s essentially what my wife and I’ve been doing during this timeframe. It looks like we’re going to hit our forgiveness target sooner than expected. I hope that plan comes to fruition, but if it doesn’t, we’re going to have some time to adjust and adjust that plan accordingly.
Resources and Support for Debt Management
Jordan Benshea: All these links that we’re mentioning and information, we’ll put all of this in the Episode Notes. So, if you are listening, you don’t need to pull over and try and write this down or stop what you’re doing and write this down. It’ll all be in the Episode Notes. With everything we’ve discussed, it is possible that we might even see an extension beyond September 30 and that things will change. Where should colleagues keep a lookout for updates?
Tony Bartels, DVM, MBA: Studentaid.gov has been keeping up to date on all of the changes, and they have a great detailed FAQ, depending on whether you’re borrowing or if you’re in repayment. It even talks about being able to get a refund on those payments you’ve made during the suspension period. So, that’s a good place to go to get familiar with all the details behind the suspension. I would spend a lot of time on VIN Foundation’s Student Debt Center playing with the tools to help you assess where you are currently with your student loans, and what your repayment might look like given your financial specifics. We’ve been writing blogs, too, on VIN Foundation. I wrote one recently on forgiveness planning, so if you’re not really sure how to go about forgiveness planning, I talked about some of the resources that we use to do that, and all of the other ways to think about it and approach it. Maybe you’ll even come up with something more creative yourself. We do also have on VIN and VIN Foundation, a way for you to get personalized assistance with your student debt and your questions. We have a Student Debt message board area, it’s a special area on VIN and now on VIN Foundation as well, where you can post your questions. We can do a thorough analysis of your situation and make sure that you get the answers that you need. Then our colleagues can also learn from those exchanges as well. Because there’s a lot of sensitive personal information in there, we do allow you to post anonymously in those special Student Debt message board areas. I’ll know who you are, but the rest of the community won’t. So, you can keep that information private, but everybody still gets to learn from those exchanges.
Jordan Benshea: Now, the Student Debt folders are this huge wealth of information, not only because it allows colleagues to get one on one support, but also, I think that there’s so much that they can learn from seeing what other colleagues have asked. That can be a really beneficial learning process for them as well.
Tony Bartels, DVM, MBA: Absolutely. That’s where we get almost all of the information that we pass along during our webinars and to students and all of our colleagues who are looking for guidance on student loans. There’s so much power in numbers and knowledge in that database of information. It’s really unbelievable.
Jordan Benshea: Is there any other information you think veterinarians and veterinary students with student loans need to know now?
Future of Student Loans and Outro
Tony Bartels, DVM, MBA: Yeah, I do think that with what we saw with this extension through at least September, way more beneficial than I would have guessed. We have to take keep an eye on what this administration is talking about in terms of what’s next with student loans. There’s still some talk about cancellation and how much that might be, and who that might be available for. So, we want to be prepared for that and look and see if there’s any potential for us to receive any kind of student debt cancellation, in any amount would be beneficial. Also, I’ve heard some plans laid out for a potential new income driven repayment plan from this administration. With this president being part of the previous administration, that rolled out a couple of different income driven repayment plans, they know how to do it. So, we may see another income driven repayment option become available over the next four years here, and from the information we’ve seen, currently, it sounds like it could be quite beneficial having a lower payment 5% of your discretionary income, as opposed to 10%. If that ends up being what it is, those would be things that those of us who are in repayment might, like my wife and I moved from income-based repayment to revised Pay As You Earn, because revised Pay As You Earn came online during the Obama Biden administration and it was a much more beneficial repayment plan for us. If we see another income driven repayment plan come online that might be even more beneficial, we would have to consider potentially switching. Now, these are all cart before the horse kind of things, but they are things that I’m keeping an eye on and things that we may see happen over the next several years of this administration.
Jordan Benshea: That’s a very good point. If anyone wants to stay up to date with what’s going on, sign up for updates on the VIN Foundation website, and we’ll put that information in the Episode Notes as well. We will send out updates and news information so that you know when these podcasts are coming out or additional information that might be helpful, webinars, etc. Thanks so much, Tony, for taking the time, really appreciate it. It’s always great to have you here to help the veterinary colleagues that I’m sure are struggling with student debt because there’s just so much information.
Tony Bartels, DVM, MBA: Certainly, my pleasure and as much as this keeps changing, I’m sure it will be, we’ll be doing these as frequently as we need to. Stay tuned.
Jordan Benshea: Exactly. Thanks so much. Have a great day.
Tony Bartels, DVM, MBA: You, too.
Jordan Benshea: Thank you for joining us for this episode of the Veterinary Pulse. Please check the Episode Notes for additional information referenced in the podcast. If you enjoyed this podcast, please follow, subscribe, and share a review. We welcome feedback and hope you will tune in again. You can find out more about the VIN Foundation through our website, VINFoundation.org and our social media channels. Thank you for being here. Be well.
