The federal student loan forbearance period instituted during the height of the Covid-19 pandemic is set to expire on April 30, 2022.
While most nurses have been able to maintain stable incomes throughout the pandemic, resuming student loan payments adds an extra layer of stress on what has been arguably the most stressful period in the history of modern medicine. To make that transition a little bit easier, we've put together this guide on what nurses need to know before payments resume.
Should You Change Your Repayment Plan?
Before the forbearance period ends, it’s a good idea to go through your budget and see what kind of student loan payment you can afford. There are multiple types of repayment plans available for federal student loans.
The most common is the standard plan, which has a 10-year term and the highest monthly payments. Borrowers pay the least amount of total interest on the standard plan, so it’s generally the best option if you can afford the payments.
But if your finances worsened during the forbearance period, you may not be able to afford the standard payment. In this case, you should switch to an income-driven repayment (IDR) plan. IDR plans base the monthly payment on your current income and family size. Use the official loan simulator to see how your payments may change with an IDR plan.
IDR plans either have a 20 or 25-year term, depending on the specific plan. After the term ends, any remaining loan balance is forgiven. Normally you would have to report the forgiven balance as taxable income, but borrowers with loans forgiven between 2021 and 2025 will not owe taxes on the forgiven portion. That provision may be extended in the future, but it depends on what future lawmakers decide.
You can also choose an extended or graduated repayment plan, which will also result in lower payments. However, extended and graduated plans do not offer any loan forgiveness options, so they’re generally seen as an inferior option.
Is Your Loan Servicer Changing?
The federal government outsources student loan management to third-party companies, many of which will be transferring their loan accounts elsewhere in 2022. These changes will affect millions of borrowers.
If your current servicer is either Navient or Granite State Management and Resources, then your loan will be transferred to a new servicer in 2022. FedLoan Servicing had announced plans to not renew their contract with the federal government in 2021, but recently decided to extend it one more year.
If your loan servicer changes, you’ll have to create a new online account to manage your loans and re-input your bank account information. Don’t delay figuring out who your servicer is. If you miss a payment, it may go on your credit report and decrease your credit score.
Because there may be so much confusion around loan servicers changing, it’s one more reason to use Lume to sync your student loans. Lume makes connecting to your student loan servicer easy, and in one click we’ll help you set up auto-debit you’ll never miss a payment (we’ll make sure you get a 0.25% reduction in your interest rate too!). Once synced, we provide transparency into how much you owe, how long you have to pay off all your loans, and most importantly, how much Lume could save for you.
Do You Qualify for Loan Forgiveness?
In October 2021, President Biden announced sweeping changes to Public Service Loan Forgiveness (PSLF) that will expand the program to more borrowers. The changes are extensive and could help many nurses qualify for loan forgiveness immediately, or at least much faster than they anticipated.
If you think you may be eligible for loan forgiveness, contact your servicer and ask if you qualify. You may be further along in the loan forgiveness process than you realize.
Some student loan experts actually advise nurses to avoid PSLF. Because PSLF requires that you work for a non-profit or government organization, you may end up earning significantly less than if you worked for a higher-paying private institution. In this instance, choosing the private route and repaying your loans may actually save you more money in the long run.
This depends on where you work, the demand in your area and your specific qualifications. For example, Lume consultant and influencer Naseema McElroy of Financially Intentional said she works for a PSLF-eligible institution and makes one of the highest salaries in her area.
How to Prepare for Changes
Even if your student loan servicer isn’t changing, you should still log onto your account and make sure your bank account is set up correctly. Sign up for automatic payments, which will provide a .25% interest rate discount and ensure you never miss a payment. Set a calendar reminder for the due date just to make sure that the payment goes through correctly.
Interest rates are still low so if you want to refinance your student loans, now is a good time. Many private lenders have variable rates as low as 1.5% and fixed rates as low as 2.5%. Log onto your Lume account and see how much you could save by refinancing with one of our partners.
Be aware that refinancing your student loans will make them into private student loans, so you’ll miss out on loan forgiveness programs, income-driven repayment options and longer forbearance periods.