Hey everyone, it’s Anna. Before we get to today’s special episode all about student loan debt, I want to say thanks to everyone who has donated to our membership campaign since we announced it last week. We are really grateful to all of you who have decided to chip in right now and help keep our show going.
We are trying to get to 200 new sustaining members by May 6th, and we know we can get to the finish line! Our most popular giving level is $8 a month. So, if you have room in your budget to give now… and Death, Sex & Money is meaningful to you… we hope that you’ll go to deathsexmoney.org/donate, or text “DSM” to 70101. Thank you so much.
ANNA SALE: We have heard from our listeners that they wanted to hear again from the student loan lady. Is that how you want us to refer to you? Or is there another nickname you’d prefer?
BETSY MAYOTTE: Student loan lady is good. During non-pandemic times I have been called the PSLF princess.
Hey everyone. It’s Anna Sale, talking today with Betsy Mayotte... a.k.a. the student loan lady… a.k.a. Public Service Loan Forgiveness princess...
AS: Student loan woman? Do you like that better?
BM: Uh, sure. Student loan warrior?
BM: It is a battle sometimes.
Betsy would know. She runs a non-profit called TISLA—The Institute of Student Loan Advisors. She’s worked for years in the student loan industry, and she was on our show last year to answer some of your student loan conundrums.
But a lot has changed in the student loan landscape since the pandemic hit here in the U.S. So we invited Betsy back to talk with us for this special collaboration with NPR’s Life Kit podcast. And we asked our listeners to send in their questions about what’s going on with their student loans right now.
I have a lot of anxiety about my student loans.
So I just wanted to clarify
Should I continue making payments as normal?
Will the interest that remains on my loans be capitalized and be added to my current principal?
And where are the details on that?
Basically my question is
Is it true that we really don’t have to make any payments?
Is that right?
Mustn’t be there some confusing and difficult red tape?
We just want to make absolutely certain that we understand correctly.]
So, that’s what we’re here to do today.
AS: We are, Betsy, gonna walk into the weeds of student loans together. So I want you to take my hand and we’re just gonna step into it, okay? Are you ready?
BM: Let’s do it. Yep. I live there so I know the way around.
AS: Okay, so one thing that is sort of around in the ether is that as a result of action in Washington, there are new rules for what people need to do or can do when it comes to their student loan bills that they get in the mail. What is the big shift that has happened in the past month when it comes to student loan debt in this country?
BM: So, the big whammy, I guess, is that 75% of federal student loan borrowers don't have to do a darn thing and they will receive a waiver of their payments through September 30th and 0% interest through September 30th. And again, they don't have to do a darn thing to get those benefits.
AS: It's like stopping the clock for them.
BM: That's a great way to put it.
AS: How do you know if you are one of those people who has student loan debt, one of those 75% where you don't have to do a darn thing but can take a pause on making payments?
BM: So that's where it gets complicated. So, um, it needs to be a federally held federal loan. There are two primary federal student loan programs. One is the Direct Loan program, and that's where the lender is the government. And one is the Federal Family Education Loan program. And that was where the government was sort of the guarantor of the loan. And a private lender was the lender. Um, what makes it extra confusing is that they both have Stafford loans. We both have Parent Plus. They both have consolidation.
AS: Oh, so the loans are called the same thing.
BM: Right. So they're exactly the same except where they're different. So you can't just look at your loan type or look at your loan servicer to determine whether your loan is eligible for these CARES Act waivers. You need to determine who the lender is. Um, and the best way to do that is to either ask your servicer if you have a federally held federal loan, or to log on to studentaid.gov and look at the loan detail and see if it lists the Department of Education as the lender.
So this is your first takeaway: find out if your federal student loan is federally held before you assume you’re eligible for the relief provided in the CARES Act. Some good news: Betsy says, if you took out a federal loan after July 1st, 2010, you’re in the clear, and don’t need to go through the double checking process.
Now let’s say your loan is in fact federally held and eligible for the CARES Act relief. Do you have to stop paying your loans right now? Here’s one listener’s question about that.
ALECIA: Hi, this is Alecia in Washington state, and I'm wondering if I can afford to continue to pay my student loan payments, I should be doing that, right? And if I go ahead and do that, how is it going to help me? Thank you.
AS: So if you have the money, should you just keep making payments as always?
BM: The short answer is probably. The only caution I would make is to make sure, you know, we don't know what the longterm economic impact of this pandemic is going to be. Um, so I would make sure that your emergency fund is in really good shape, that you have a very robust emergency fund. And you know, if you have any other higher interest debts out there you may want to take a look at those. But otherwise, absolutely. I mean, this is practically free money. Um, any payments that you send during this period, assuming you didn't have a lot of interest that had built up prior to March 13th, all of it's going to go to principal. Which is going to save, not only is that interest-free money, but it's going to reduce your balance more than it would have been reduced if the waivers weren't in place, which means that you're going to save more interest over the life of the loan as well.
AS: Oh, that's interesting. I hadn't thought of that because interest isn’t accruing, whatever you spend goes straight to principal. Um, so you can chip away at that if you have the money to do it. What if you're in the opposite position? Say you made your student loan payment in March, and then the world changed and you realize, ugh, god, I wish I could have that student loan payment back. And actually it's one that I didn't have to pay. Can you get that money back?
BM: So if payment was made after March 13th, you can call and request that payment be refunded to you, assuming that your loans are eligible for the waiver.
Okay, so… if you’re eligible for CARES Act relief but you want to pay down your principal balance on your loan, now might be a good time to keep paying your monthly bill. But listen up, all you Public Service Loan Forgiveness people out there… that advice does NOT apply to you.
BM: There's no benefit to paying. You're stealing from yourself.
Just a quick refresher: the Public Service Loan Forgiveness program allows borrowers working in qualified public service jobs to have their loans forgiven by the government after ten years if they make 120 on time payments. And there’s been a LOT of anxiety and controversy about this program as the kinks in the system are not entirely worked out, and a lot of people have struggled to get their loans forgiven.
So, understandably… we got a lot of questions from people in the program about how the CARES Act would impact them. Like this one, from Kevin.
KEVIN: I'm a physician assistant in New York City pursuing the Public Service Loan Forgiveness. I recently received an email from FedLoan servicing stating that I will have my payments postponed or placed on administrative forbearance, but that these months will still count as qualifying payments for the Public Service Loan Forgiveness. Can this truly be the case? Thanks in advance.
AS: So is that true? Can you skip these months of payment and they will still count towards those 10 years of on-time payments?
BM: Let me take my student loan lady scarf off and put my PSLF princess crown on. Um, and I know this sounds too - I've seen so much anxiety over this because it sounds too good to be true, but it is absolutely 100% true that under the CARES Act, um, you do not have to make any payments on your eligible Direct Loans. Um, you know, while you're working for an eligible employer, you're going to get the 0% interest rate and that six months is going to count towards PSLF just like you were actually making the payment. And again, I know it sounds too good to be true. I have so many borrowers that are just so anxious about it they say, well, I'm going to pay anyway. Don't pay. There's nothing to hedge. The CARES Act is super, super, super clear about this. That that period of time will count, just like you made a payment.
AS: So this is a big tip. If you are enrolled in Public Service Loan Forgiveness, take advantage of the CARES Act and do not make any payments until after September 30th, 2020 because again, if you think at the end of the Public Service Loan Forgiveness period, you are going to get your loans forgiven, you'll be making payments that you didn't have to make.
BM: That's absolutely right. Take those payments, sock them away in a separate savings account if you have some anxiety. Um, and then when you do get your forgiveness, you can take a nice vacation. Hopefully, if we’re not all still quarantined, you can take a nice vacation.
Now for those of you listening who want to double and triple check this, we totally get it. You can see this in writing for yourself from the federal government.
BM: The Department of Education has their own FAQ page, and it's very clearly written on that FAQ page, and you can find a link to that page at the bottom of ed.gov. You'll see a box that says COVID-19 Guidance, and you click on it and it'll bring you where you need to go.
You can also see all of the CARES Act details at Betsy’s website, freestudentloanadvice.org and at her organization’s special COVID-19 student loan site, studentaidpandemic.org.
After the break, more questions for Betsy, including those from people who have private student loans.
LISTENER: My current student loan payment for private student loans alone is over $1000 a month. But I’m afraid that with this pandemic continuing, I’m not going be able to afford that monthly payment especially since I lost one of my jobs. Is there a possibility that the government can do anything to help with the people with private student loans?
This is Death, Sex & Money from WNYC and NPR’s Life Kit in a special pandemic student loan collaboration. I’m Anna Sale.
So far, we’ve talked about the CARES Act and the six months of relief that it provides for people who have federally held federal student loans. We talked about how to find out if you have that type of loan, and what it means for you if you’re enrolled in the Public Service Loan Forgiveness program.
But what about those who have private loans? Like this listener, Shayla in Illinois.
SHAYLA: I know there's been a lot of conversation about the CARE Act and the impact that it has on people who have federally backed loans, but is there any recourse or is there anything in place for those who have private loans who are also suffering through this pandemic and may need some sort of financial assistance? Thanks so much.
BM: Private loans, unfortunately, there's no sort of blanket guidance other than to call your loan holder if you're financially struggling and see what they're offering. You know, I’m not an attorney, but I think it's - I'm not sure the government can require a private lender to do anything, um, as far as reducing an interest rate or putting a hold on payments. Um, I'm not sure if they have the authority to do that on the private loan side. The chatter that I'm hearing from some of the lenders is that some of them are offering automatic relief. I know of some that have reduced interest rates across the board. Um, I haven't heard a single one that hasn't said that they have, that there isn't something they can do to help if the borrower is struggling and at least gives them a call. Uh, but on the other hand, I've also heard some that at this point, they're only offering what their sort of typical relief would be, which would be limited forbearance and sometimes for a fee.
A forbearance is when you're allowed to postpone your student loan payments for a period of time, but interest usually continues to accrue. And if that interest isn’t paid off by the time that the forbearance ends, it can get tacked on to your principal balance, which can cost you a lot more money in the long run.
So, if you have private student loans, and you're having trouble paying your student loan bills right now, call your servicer and ask them about all of your options.
And if you’re struggling to pay your bills, and you’ve got the type of federal loans that are not covered by the CARES Act, there are options for you, too. Like switching to an income-driven repayment plan, which could lower your monthly costs.
BM: There are other options as well. There's unemployment deferment. There’s economic hardship deferment. So depending on what your situation is, will depend on what the best solution is for you during this period of time.
The thing that you really don’t want to do right now is just ignore your student loan bills. That’s what leads to defaulting on your loans. But let’s say you were already in default on your loans, before the pandemic hit. The good news is if they’re federally held loans, there could be some relief out there for you too.
BM: Defaulted borrowers of federal loans were also given pretty significant relief.
BM: If you have federally held defaulted loans there will be no collections for the time being, likely through September 30th. If you were set to have your tax refund taken or your wages garnished, or even your Social Security garnished, any of those activities that were due to happen after March 13th are canceled. So they're stopping all collections on federally held defaulted loans, uh, for the time being, likely through September 30th. And if they took your tax refund after - cause it takes a minute to sort of stop those programs. But if they took any of those monies after March 13th, they're going to refund them to you. Um, you may have to call and ask for that refund. Um, but I've already seen people already get those monies back. So that's for federally held defaulted loans.
The other thing that's happening with federally held defaulted loans, which is huge, is there's a program called loan rehabilitation, which allows a defaulted federal student loan borrower to get back on track. It's a great program. Um, normally you have to make nine consecutive on-time payments to get loan rehab, but under the CARES Act, this six month period that they're putting collections on hold counts just like you made a rehab payment. So just like, it's very similar to what they're doing with Public Service Loan Forgiveness. So instead of having, if you are already in a loan rehab program, let's say you were three months in when the CARES Act waivers kicked in. You don't have to make another payment and your loan will be considered rehabilitated, assuming you sent the rehab agreement back in. I have never seen them do anything like this before. This is a gift, uh, to those borrowers in that situation.
So if you’re already in a loan rehabilitation program, this is great news for you. And if you’re thinking about getting into that program, Betsy says as of right now it’s looking like this CARES Act policy would apply to you too.
BM: As of today, they haven't said anything different, but it's possible that they could say that you had to have already been in a loan rehabilitation program for those payments to count. Um, so, you know, if you're listening to this two months from now, uh, it's, it's probably a good idea to double check either our website or the Department of Ed's website to make sure they haven't added that caveat.
AS: How do I go about getting into loan rehabilitation? What do I do?
BM: Call whomever is the collection agency that's in charge of your loan, and if you're not sure who that is, you can log on to studentaid.gov and it will show you who the collection agency is.
You might have noticed through this entire conversation that borrowers who have these federally held federal student loans are getting the most support right now. And for people who haven’t yet taken out loans but are heading to school soon, Betsy has one more word of advice for you.
BM: There might be a stronger temptation to take a private loan versus a federal loan because the interest rates are currently so low. I stand by the advice that I always give, is that, in general, you should try to stay away from private loans. Um, mainly because private loans don't have the options for relief that federal loans—I mean, we're seeing that right now during the pandemic, the private loans aren't eligible for a 0% interest rate or the six month payment waiver and federal loans are, and that applies even when we're not in the pandemic. So, even though you might see really low private loan interest rates, I would think long and hard before taking those over a federal loan. And it's not the only reason. There's Public Service Loan Forgiveness. There's income driven repayment plans. There’s deferments. Those are all things that the vast majority of private loans don't offer. So even in the good times, it's, it's good to know that those sort of lifeboats are available.
AS: Betsy, I have one final question from a listener for you and it is a big question. We've been talking about a lot of the details about different student loan programs, private versus federal, federally held versus non federally held, but this is a big structural question about student loan debt.
MICHELLE WASHINGTON: Hi. My name is Michelle Washington and I have a question I'd like to propose. I've got graduate student loan debts. At any point, will the government consider canceling student loan debt? Thank you.
AS: Do you see a world in which student loan debt will go away? Is that, is that something that's being contemplated in Washington? Is it something borrowers should be thinking about?
BM: Well, that's a, it's, it's a very complicated question. Let's take this in steps. Let's talk about the pandemic first because there were some proposals being batted around about, not forgiving all student loan debt, but forgiving $10,000 for every student loan borrower. And obviously that didn't make it into the CARES Act. Um, I don't see student loan forgiveness making it into any future stimulus bill either. And the answer is, the reason for that is because there's a finite pool of money here and there's other things other than student loan debt that we need to spend it on.
So, you know, I think if Congress is trying to budget this pool of money that we have. They also have to worry about unemployment. They have to worry about increased costs to, um, social services and welfare benefits. Uh, they have to worry about healthcare costs. Um, you know, the small businesses and the large businesses and the large, um, industries that are going to struggle because of this. And, you know, I think that if they have a choice between forgiving $10,000 for every borrower when not every borrower is economically struggling. And using that money to pay for some of those other things, I think that's what they're going to do. So anybody, you know, I'm not trying to, you know, make it a rainy day for anybody. But I think if you were counting on forgiveness as a result of the pandemic, I wouldn't.
Now let's talk about the long term. We saw a lot of really interesting proposals as a result of the presidential campaigns. Um, Senator Warren had a really robust, uh, proposal that included a significant portion of student loan forgiveness. Um, Senator, uh, Bernie Sanders had one as well, and now, uh, Biden has come out with his own sort of student loan plan. The problem, you know, the thing that people need to remember is that student loans are not the problem, although it might not feel like that. Student loans are the symptom. The problem is the cost of higher education. So you can't have a proposal that just blanketly wipes out 1.4 trillion in federal student aid and not have a solution to make sure that that aid the very next day doesn't start creeping back up again. Um, so that was one of the things about Warren's proposal that didn't get as much press 'cause it wasn't as sexy. But one of the things that Warren's proposal did, is it also tried to solve the problem of the cost of higher education to make sure that once we did wipe away a chunk of student debt, that we made sure that it wasn't, it didn't sort of creep up again. So I think going forward, the chances of of blanket student loan forgiveness, I wouldn't count on it at all. I would not plan my life around blanket student loan forgiveness by any means. Uh, 'cause it's an expensive proposal. But I do think that we might see some changes to ameliorate that issue. Things like - I, I've heard chatter of, for example, making schools have some financial skin in the game for the student debt, which could alleviate—it could make some schools more thoughtful about their, their tuition charges, which in turn would mean a reduced amount of student debt in the future. So those are the kinds of things that I would be putting my hopes on more than a blanket student loan forgiveness solution.
AS: I'm asking you all of these very detailed questions because these are very complicated things and you are telling me in an assured voice what the answers are. Are there people out there who are giving bad advice, unscrupulous advice, scamming people right now when it comes to what they need to be doing with their student loans?
BM: Oh, yes. Um, and it burns my buttons.
AS: Are you seeing an uptick in scams? Is this more than usual?
BM: I don't know if it's an uptick. Um, but, it's unfortunate that people like this come crawling out of the gutters during times of crisis. Anybody that tries to create a sense of urgency, like, “You have to do X or you’re not going to get the waiver,” or "You have to pay this fee," that is almost certainly a scam. And anybody who runs across any of those, please please please take a minute and report them to the Federal Trade Commission as well as your local attorney general’s office. You’d be doing the rest of humanity a favor if you do report them if you do come across them.
That’s Betsy Mayotte. Student loan warrior, PSLF princess, and founder of The Institute of Student Loan Advisors, or TISLA. You can find her website at freestudentloanadvice.org or check out her pandemic-specific site at studentaidpandemic.org. And one more tip from me to you… Betsy answers email questions from borrowers. So hit her up!
This has been a special collaboration with NPR’s Life Kit. Make sure to check out the other Life Kit podcasts at npr.org/lifekit. And you can also subscribe to their newsletter at npr.org/lifekitnewsletter. And if you’ve got a good tip, whether it’s about how you manage your student loans or otherwise, leave Life Kit a voicemail at 202-216-9823.
And if you’re looking for more stories about student loan debt, we did a whole series of episodes featuring listener stories about student loans a few years back. You can find that by texting “loans” to the number 70101.
I’m Anna Sale, and this is Death, Sex & Money from WNYC.