Tune in as we chat with VIN Foundation Board Member and student debt expert, Dr. Tony Bartels. We discuss how COVID has impacted student loans, and what the CARES Act means for veterinary students and veterinarians managing their debt.
In this episode we mention the following resources:
- VIN Foundation Student Debt Center: https://vinfoundation.org/studentdebtcenter
- VIN Foundation My Student Loans: https://vinfoundation.org/mystudentloans
- VIN Foundation Blog: https://vinfoundation.org/coronavirus-impact-to-student-loans-covid-19/
- Student Loan Triage in the Age of COVID webinar recording: https://vinfoundation.org/climbing-mt-debt-student-loan-triage-covid-webinar/
- Student Aid: https://studentaid.gov/
You may learn more about the VIN Foundation, on the website, or join the conversation on Facebook, Instagram, or Twitter.
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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.
Discussion with Tony Bartels, DVM, MBA on Student Debt
Jordan Benshea: This episode, we’re having a discussion with VIN Foundation board member and student debt expert, Dr. Tony Bartels. Well known for his popular Climbing Mt. Debt presentations, Tony shares how COVID and the CARES Act are impacting veterinary school student loans. He offers helpful information to both veterinary students and veterinarians trying to navigate these uncertain times while balancing their debt load. Thank you for listening.Welcome, Tony. Thanks for being with us.
Tony Bartels, DVM, MBA: Thank you, thanks for putting this together.
Impact of COVID-19 and CARES Act on Student Loans
Jordan Benshea: There’s been a lot of changes to student loans due to COVID. Will you take us through a timeline of what’s happened?
Tony Bartels, DVM, MBA: Sure. So back in March, earlier this year at the onset of the outbreak of COVID, there was a presidential action that was put into effect that paused payments and set interest rates to zero. Shortly after that, so later in March, Congress passed the CARES Act, and the President signed that into law. That made the changes a little bit more specific, but it still essentially did the same thing that the presidential action did. The interest rates were set to zero; payments on all federally held student loans were set to zero, and you didn’t have to do anything. These were changes that were all done automatically if you had the appropriate loan types. The nice thing that the CARES Act specified were for those folks who were using plans like income driven repayment plans, Pay As You Earn, Revised Pay As You Earn, IBR, it specified that the time spent during the suspension period would also count towards forgiveness and for any of those folks who are working towards public service loan forgiveness, and also specified that this time, provided they were still employed by a qualified employer, would also count towards public service loan forgiveness as well.
Jordan Benshea: So that initial shift that happened and created the CARES Act back in March, what changes have happened since then?
Tony Bartels, DVM, MBA: We’ve seen that automatically applied to everybody who has that appropriately held federal loan type. You didn’t have to do anything. You didn’t have to request anything and that caused a lot of confusion at first. They also applied it using the forbearance options that are out there. So, those were some of the ways that it was implemented. Usually, when we see things like forbearances on student loans those are not a good thing, but this is quite different. This is a special kind of forbearance that the CARES Act specified, and it has all those benefits that we talked about previously. Now the CARES Act was due to expire at the end of this month, September 30th and theoretically, we were all going to reenter repayment based on whatever repayment plan we were using ahead of time, or if we hadn’t entered repayment yet, we would provide some income documentation and potentially enter something like an income driven repayment plan. But there has been a new presidential action issued earlier this August and we have now gotten some clarification from the Department of Education on that. Essentially, that extends the relief that the CARES Act provided through the end of the year. When that action was initially issued, there was some question as to how it was going to be interpreted, but now we’ve seen how the Department of Education is interpreting it. You can see that on studentaid.gov. We’ve also started to receive, or you should have started to receive from your loan servicer, their interpretation of what the Department of Education is telling them to do. Essentially, they are taking this presidential action as an extension of the CARES Act through the end of this year.
Jordan Benshea: How does somebody know if their student loans qualify for the CARES Act suspension or forbearance?
Tony Bartels, DVM, MBA: One would have received some kind of notification from your loan servicer, but if you don’t have the right email with them or you know they have the wrong address for you, you may not have received any kind of correspondence from your loan servicer. Another way is to log into your loan servicer account, and you should see that your interest rates are set to zero. So, for any student loan that falls under the CARES Act appropriations, you’ll receive a 0% interest rate. Also, your payment is shut off, essentially. Those are all indications that you have the right types of loans that qualify for those. If you’re still a little bit confused, what we tell people to do is go and obtain their student aid data file. That’s another piece of information that you can grab from studentaid.gov. When you’re logged in there, using the same credentials that you used to apply for student loans, you can obtain your student aid data file. That is essentially a complete record of your federal student loan borrowing history. If you grab that file, and then go over to the VIN Foundation Student Debt Center, and upload it to the My Student Loans tool, so VINFoundation.org/mystudentloans, you can take that student aid data file, upload it there, and we’ll identify those loans that qualify for the CARES Act. You’ll see a 0% interest rate for those, and in the loan servicer section, you’ll see Department of Ed labeled as the owner of those loans. Any loan that’s owned by the Department of Education qualifies for the CARES Act suspension and this extended presidential action.
Jordan Benshea: All these links that you’re mentioning, we will add them into the Episode Notes so that they’re easy to access.
Understanding Loan Forbearance and Suspension
Jordan Benshea: You mentioned the word forbearance, and a lot of people might hear that and think, wow, that sounds really scary. I’m not sure I want that on my record. Is that something that they should be concerned about or because we’re in this unusual situation while it may seem scary to a lot of people in normal instances in this one it’s not? What’s your read on that?
Tony Bartels, DVM, MBA: So generally speaking, we’ve spent a lot of time really discouraging people from using things like deferment and forbearance on their student loans and loan servicers for years have been really quick to put your loans in forbearance if you call them to ask a question or signify that you’re having any difficulty making student loan payments. Generally speaking, keeping your loans in an income driven repayment plan is much better than putting your loans into a deferment or forbearance. However, just like everything else that’s associated with COVID-19 and all the things going on around us, this is a pretty unique situation. So, the CARES Act actually calls this a suspension period. It doesn’t call it a forbearance. Forbearance, you can think of it as the logistically technically appropriate way for them to apply what is laid out in the CARES Act. So, this time, and pretty much this time alone, it’s okay to have your loans in this automatic forbearance that was applied if you have those appropriate federally held student loans, but I would still discourage anyone from voluntarily requesting a forbearance that isn’t specific to this COVID-19 pandemic and the CARES Act, because it does have some pretty negative consequences.
Jordan Benshea: So, if we get over this word forbearance, and we focus on this suspension, there also seems to be a lot of questions with concerns about the government not fully honoring these changes. Like are they going to go back on this? Just concerns in general about depending on the government and these changes, because it’s such a big shift. What would you say to address those concerns?
Tony Bartels, DVM, MBA: Those have been concerns around the income driven repayment plans and forgiveness when it comes to student loans, since these things have really gained steam and popularity, but I would say that the rules and the regulations, the laws are quite specific when it comes to how student loans are to be treated. That was the nice thing about Congress specifying exactly what was due to happen in the CARES Act is that we have some pretty tight language around this special time. This special suspension period will qualify towards forgiveness, any type of forgiveness that you’re working towards, whether it be income driven repayment forgiveness, or public service loan forgiveness, that time will count under the law that is the CARES Act. So, there are some pretty specific and actually robust protection for that.The other part that helps to support it are the information that’s available on the studentaid.gov website. So essentially the Department of Education, they answer these questions, and they say pretty explicitly what this means for various aspects of your student loan repayment situation and the same language has been echoed by student loan servicers. So, we’ve got a lot of layers of information that has been largely consistent across all of those entities that signify that these are qualifying payments, and this time counts and that you shouldn’t be worried about that. The other part of that is just making sure that it all comes true. There’s a little bit of administrative homework on your part to make sure that you’re documenting that, yes, I was in an income driven repayment before this period took effect and that all this time should, in fact, count towards your forgiveness. If you’re working towards public service loan forgiveness, you’re still going to want to submit the employment certification form. Probably after all this is ended and the suspension periods are over, they’ll do a better job of accounting for all of that sort of thing, but you know the old adage of trust, but verify. There’s some really good information out there. We’ve gotten some good assurance that this is, in fact the case, but you’re going to want to verify that for your specific situation just to make sure that everybody’s on the same page.
Jordan Benshea: You referred to this a couple times already, but just to make it clear for our audience. If you are in income driven repayment plan and your payments are now being suspended because of the CARES Act, this does not tack on any time at the end to forgiveness. Correct?
Tony Bartels, DVM, MBA: That is correct. This is really I would say, an added bonus of this CARES Act legislation for those of us who are using an income driven repayment plan and working towards any kind of forgiveness, whether it’s the taxable version or public service loan forgiveness, which is nontaxable, it is because this roughly nine months of time that we know of will count towards that forgiveness. It’s not going to interrupt any time that we anticipated being in repayment. It’s not going to add any time to that. Having the payments set to zero, and the interest set to zero, is essentially the same as wiping off nine months of payments for your forgiveness. This has really been kind of an unexpected bonus for any of us who are working towards forgiveness and using an income driven repayment plan. In my opinion, it was not even really needed. I think that the income driven repayment plans were set up to handle this exact kind of thing. So, if you were in a pandemic or losing a job or had an unexpected interruption in your income, we already had protection using the income driven repayment plans that would allow us to have our payments set to zero or reduced because our income was reduced. Congress and the President went above and beyond in this aspect and turned the interest rates off, turned the payments due off and also gave us credit towards income driven repayment that went even beyond my expectations for things that were going to happen during this pandemic regarding student loans.
Jordan Benshea: So, what happens if someone’s currently in repayment, and their loan status now says forbearance, but they’re set up for automatic payments? Do they need to turn off the automatic payments? How does that work?
Tony Bartels, DVM, MBA: If you have the federally held student loans, then you had your auto pay turned on, which I would recommend everybody do, because you get a 0.25% interest rate discount as part of using the auto pay feature on any kind of federal or direct loan. They turn those off automatically, too. As part of the automatic application of the CARES Act provisions, everybody got their automatic payments turned off, everybody had their interest turned off, everybody had their minimum monthly payments turned off. That happened automatically, you didn’t have to request that. If for some reason you did want to reenter repayment and have a minimum monthly payment due you can voluntarily request to have the forbearance ended, and then you can have a minimum monthly payment due which means you can then turn the auto payment feature back on. You’ll still have the 0% interest rate though. There’s no way to voluntarily end that, not that there would be any logical reason for anybody to do that. You’ll still receive the 0% interest rate during this period that’ll last at least through the end of this year.
Jordan Benshea: Is there a scenario in which you would recommend making payments to student loans during the suspension?
Tony Bartels, DVM, MBA: That’s a tough one that really depends on the specifics of the circumstance, but you do have to understand how student loans behaved before the pandemic and all of the CARES Act provisions to know whether or not it makes sense financially to make payments during this suspension period. For some people, and it’s not wrong to think that, hey, my interest rates are zero, I can really make a dent in my student loans and play some catch up, or maybe pay them off faster than I was expecting to. That can work, that can be a good strategy if you didn’t experience any interruption in your income, or maybe you’ve even experienced an increase in your income. We’ve seen a lot of veterinarians report that they’re busier than ever. So, maybe you would even increase your income during this timeframe, and you don’t want that payment to be off. I would still encourage you to take a second look at that. With your interest rates being zero, and no payment being due regardless of the repayment plan you’re using, you’re essentially in suspended animation for your student loans right now. So, there’s really no benefit to making that payment now, versus making the payment right before the suspension period ends. If you’re not using an income driven repayment plan, or maybe your student debt to income ratio is less than one, and you anticipate paying your student loans to zero before reaching forgiveness, then it can make sense for you to make additional payments during this period, but I would still hold off on making regular monthly payments. I would instead take the payment that I was anticipating making and put it into the highest yielding interest-bearing account I can find. I would stock up on that account and then right before we find out that this suspension period is going to end, if it still makes sense for me to make that payment, then I would make that payment at that time. That gives me the flexibility in case I need those funds for something else, or something other pops up. We are still in the midst of a pandemic year, so anything goes, anything can happen. What might feel like a great financial time for you now can maybe change as quickly as tomorrow, if you or somebody in your family gets sick or has to spend some time in the hospital or your practice that you’re working at is adversely affected because of the area that you’re living. I mean, who knows? I would want to have that cash available to me in a savings account, potentially earning interest, in case I need it for emergency purposes rather than give that money over to the Department of Education and not have access to it, because the impact that you’re going to have on your student loans, whether you make that payment now or three or four months ago, or a month from now is going to be exactly the same as if you put all of that towards your student loans right before the suspension period is deemed to be over. So, keep that cash on hand, enjoy the suspension period, if it still makes sense for you to make a payment as the suspension period winds down, then do it right before it ends, because then you can have a better idea of how things look for me. I don’t anticipate interruption in my income. I still have a good robust emergency fund. I’m still maxing out my retirement accounts. I’ve met all my other financial goals. If I still think it’s appropriate for me to pay make this large payment towards my student loans, that’s the time to do it, right at the time that this suspension period is about to end, and you don’t anticipate any interruptions in your income.
Advice for Veterinary Students and Professionals
Jordan Benshea: We’ve discussed what this means for veterinarians already in repayment plans. What does this mean for veterinary students?
Tony Bartels, DVM, MBA: This is a great time, from a student loan standpoint, to be in veterinary school. We’ve done a couple of meetings with some VBMA and SAVMA groups at specific schools already this semester. I fully understand and empathize with the change in how they are being educated this semester, but for those who are borrowing for their education this is a huge bonus. For them to have no interest accruing on the loans that they’re using to finance their education is huge. This is particularly beneficial for those who are in their third or fourth year of veterinary school, because the more that you borrowed, the more principal balance that you have on hand, the bigger impact that 0% interest suspension is going to have on your portfolio. So, from a standpoint of being a veterinary student, particularly those third- and fourth-year students, again, this is a huge, huge relief when it comes to the amounts that would normally accrue while they’re in school. That should reduce their total repayment balances. We’ve done some analysis depending on where you fall in the borrowing spectrum, this could result in 10s of thousand dollars of savings for some people. So, again, this is easy. These are big dollar amounts, and they’re really a well welcomed relief when it comes to student loans against students.
Resources and Final Thoughts
Jordan Benshea: Has the VIN Foundation Student Debt Center made any updates to address the CARES Act?
Tony Bartels, DVM, MBA: Yeah, so we have worked in the CARES Act to the VIN Foundation Student Debt Center, you’re going to see those changes in either the My Student Loans tool, the In-school Loan Estimator, or the Loan Repayment Simulator. We had accounted for the period of time covered by the CARES Act, so at least through the end of September, but we also added a feature in there that allows you to extend the CARES Act provisions based on new information that we hear. So, recently we’ve got the presidential action that we know is going to extend it to at least the end of the year. Who knows, maybe Congress will still act before the end of September and codify that into law or maybe even extend it beyond there. We just really don’t know, so we have that flexibility built into all of the tools in the VIN Foundation Student Debt Center to accommodate that time that we either know about or that we anticipate, so we can see and quantify the impact to our student loans, no matter where we are in the stage of repayment.
Jordan Benshea: Where would you suggest someone goes for updates on this topic? You’ve mentioned, obviously, the CARES Act is right now through the end of this year, but it can feel like a moving target. What are some of the places you’d suggest are good to go to refer for the latest information? We’ll make sure to put the links in the Episode Notes.
Tony Bartels, DVM, MBA: Studentaid.gov is probably the first place that anybody would want to make a stop. At the top of the page, they have a big banner that talks about the Coronavirus impacts to student loans, whether you’re a borrower or person in repayment, they’ve got a lot of scenarios laid out. What if this? What if that? And they answer those questions. It’s probably the most explicit information I’ve ever seen the Department of Education provide. It’s a really, really useful resource, and it’s been kept up to date pretty regularly. The other sources of information, I would always go into the VIN Foundation Student Debt Center. We’re constantly posting updates to what’s going on with your student loans, either on the tools themselves, or as part of the VIN Foundation blog. We’ve been chronicling a lot of this through the VIN Foundation blogs at VINFoundation.org/blog and you’ll find some of the recent postings there. We’ve even done some videos that cover all of the CARES Act provisions and how to identify these things in a more of a step-by-step fashion if you still have some questions about that. We continue to add content like we’re now with this podcast to help you understand the impacts to your student loans.
Jordan Benshea: We’ve covered a lot of information so far. What would be one piece of advice you’d give someone who is navigating student loans in this age of COVID and feeling uneasy?
Tony Bartels, DVM, MBA: I think it really depends on your situation, but I think for those of you that have student loans, maybe you’re in repayment, and you still have a consistent source of income, use this bonus time to start boosting a lot of the other areas of your financial plan. I know student loans are a really a source of stress for many students and recent graduates but use this time to think about what the rest of my financial wellness look like. For some of us, again, turning these payments off and turning the interest off has resulted in 10s of 1000s of dollars of additional cash flow. What are some other things that you can do with that cash flow that are going to be way more beneficial than making payments on a 0% interest rate loan? This is a great opportunity to build an emergency fund, start investigating retirement accounts if you’ve never started one of those. If you are using one, can you contribute more? Maximizing your retirement contribution which also reduces in many cases your taxable income, which can also reduce your monthly payment when we do reenter repayment. So, there’s a lot of things that are tied together when it comes to student loan repayment and how you use your income. That you can take advantage of some of these things like saving for retirement, or buying a home, or thinking about buying a practice, all of these all of these things are doable and even more doable when you don’t have a monthly student loan payment due. You still get all of the benefits that you normally would as if you were in repayment and in good standing on your student loans. So, take advantage of this opportunity to reassess your financial plan and try to boost a lot of those other areas that many recent grad veterinarians are leaving on the wayside because their student loans typically command all their attention.
Jordan Benshea: I think that’s wonderful advice for those with student loans who might feel a little bit uneasy at this time because we know that there is a lot of uncertainty right now.
Tony Bartels, DVM, MBA: Absolutely.
Jordan Benshea: Is there anything else that you feel would be important to share with our audience?
Tony Bartels, DVM, MBA: No, I just hope that everybody is otherwise safe and healthy and remains so during this outbreak. Again, it’s been interesting to see the impacts economically to the veterinary profession. It really depends on the area that you live, but it does seem like this has been almost a boost to the veterinary profession. We’ve seen a lot of demand for veterinary services, which is great for veterinarians. Take advantage of the opportunities that you have, and if you have been impacted by COVID-19 in any way, again, these are benefits that are in place to help you weather those storms. Hopefully, you’ve got an emergency fund on hand to help you weather those storms as well and you’re able to get back on your feet, and help your family get back on their feet if they’re impacted as well.
Outro
Jordan Benshea: Wonderful. Thanks so much for joining us, Tony.
Tony Bartels, DVM, MBA: Yeah, thank you for having me.
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.
