Navigating Student Loans during and after the Pandemic Pause

EAP – “Ask the Expert”

Migdalia Gomez, Community Engagement Manager, Harvard Federal Credit Union (HFCU)

Even before the Pandemic, it was sometimes overwhelming to navigate the loan application and repayment process. COVID-19 has represented both challenges but also opportunities for relief and flexibility with student loans. In this article, we highlight information about the current state of student loans and how to prepare for the Pandemic transition. The EAP is grateful for the expert guidance provided by Migdalia Gomez, from HFCU.

What Supports are Available right now for those with Current Student Loans?

Private Loans

A private loan is one that comes from a bank, a state, or a school. Right now, there is no formal, mandatory support in place, such as loan repayment delays or forbearance. However, Migdalia indicated that many private loan organizations have shown flexibility and a willingness to work with clients during these challenging times. Many have allowed missed payments without a penalty or have showed flexibility with interest rates. The key is to communicate with your lender or servicer to let them know you could benefit from assistance. They may require documentation to confirm your hardship. It is not advisable to just stop paying the loan(s) without a conversation with your lender.

An article in Bankrate has a list of private lenders who are offering some relief as of April 2021. This list is not exhaustive. If you have questions about your loan(s), contact your lender.

Here are some Tips from the Consumer Financial Protection Bureau for those who co-signed private student loans.

 Federal Loans

A pause for federal loans was offered on March 13, 2020, due to the COVID Pandemic, and has been extended a few times. Currently, this pause is slated to last until May 1, 2022. This means that those who were/are currently in the repayment phase of loans do not have to make any payments until October 1 of this year. There is a 0% interest rate, and no penalties accrue during this time. No action or notification is required. It’s important to note that this is not loan forgiveness. You must eventually make all payments on the loan. ​​If you were expecting to start making payments on your loan within the period of extended pause, your first payment won’t be due until repayment begins. Usually, interest accrues during a grace period, but if your six-month grace period overlaps with the administrative forbearance  period, interest won’t grow.

Loans Included in the pause:

• Department of Education owned: Direct, FFEL and Federal Perkins loans
• Defaulted FFEL Program loans managed by guaranty agencies.
• Defaulted HEAL loans owned by the Department of Education
• Parent loans

Should you make payments on Federal loans during this time-period? Some factors for consideration 

• Migdalia explained that it is perfectly acceptable to make payments during this time, but it might also be a good time to take advantage of the pause because of the 0% interest offering. This is especially true if you can use those payments for more pressing expenses
• Those who are not eligible for forgiveness (public service, teacher or military loan), have more than $10K left and are on a standard  loan repayment, might choose to pay some off now
• Partial or late payments will not have any penalty
• If you were in default before the Pandemic, the Government will not garnish your wages or tax refunds
• There will be no impact on your credit score if you don’t make loan payments at this time. Your credit will be the same as if you were current with payments
• You can also opt to stop payments at any time before the planned end date (January 22, 2022) of the program
• If you find that your financial situation has changed or has become more challenging, you can request a refund of any of the payments you have made since March 13^th, 2020

What Actions can you take now to be Prepared for the Pandemic Student Loan Transition

Check your credit score

It’s good to keep apprised of your credit rating. Normally you are eligible for one free report from each agency per year, but through April 20, 2022, you can check once per week via AnnualCreditReport.com. Experian, Equifax and TransUnion are all participating in this special allowance. Now is an excellent time to improve your credit score. Migdalia explained that this can help you to be in a better position to refinance or consolidate loans when and if you are ready for this. Some tips to improve your credit score in just a few months:

• Pay your bills on-time
• Charge no more than 30% of your credit limit even if you pay your cards off in full every month
• Migdalia  recommends that HFCU members contact GreenPath Financial Wellness for free Credit Counseling , non-HFCU members have access to GreenPath’s Resources on Credit

Consider refinancing or shopping around for private sector student loans

• There is a possibility that interest rates may go up soon due to inflation. Therefore, now may be a good time to lock in a favorable rate with private loans
• Since Federal loans are at a 0% interest rate, it probably doesn’t make sense to refinance or consolidate those loans currently

Start doing some “practice runs” for Federal loan payments

Migdalia recommends planning for the return to regular loan payments. Do not rely on the hope that the pause deadline will be extended or that loan forgiveness will happen.

• Start by checking your loan portal for payment amounts and loan balances
• Figure out how your payment will fit into your overall budget
• Start putting some money aside so you can meet your payments
• If your loan payments would have started during the Pandemic, you will still be eligible for the 6-month grace period once required loan payment starts again
  – Note that student loans automatically get the grace period, but parent loans require a formal request to utilize a grace period

Do your Homework for Managing loans once payment is once again required

• Remember that you can defer federal student loan payment if you go back to school (including graduate school) at least half-time
• You may wish to re-finance or consolidate Federal loans once the interest rate goes back to a market level, and you are no longer interested in federal loan benefits
• Explore whether you are eligible for loan forgiveness via Public Service Loan Forgiveness (PSLF), (after 120 payments)* if you:
  • Work for a qualified employer (non-profit, such as MGB)
  • Work full-time (as defined by the employer) for a non-profit or a combination of non-profits
  • Make payments on an Income Driven Plan

*Please note that those who meet requirements for Public Service Loan Forgiveness will have “planned payments” during the Pandemic included towards the 120 payment requirement, even if they are currently taking advantage of the pause.

Resources

CNBC – Federal Student Loans Extended through May 1, 2022 

Federal Student Aid – Coronavirus and Forbearance Information for Students, Borrowers, and Parents

Federal Student Aid – List of Federal Loan Servicers

Mass.Gov – Resources for Student Borrowers  during COVID-19

Nerd Wallet – Student Loans are on Hold — Should you Pay Anyway?

US Department of Education –  Relief for Student Loan Borrowers with Total and Permanent Disabilities during the COVID-19 Emergency

TISLA – Free Student Loan Advice

Nurse Journal – Student Loan Forgiveness for Nurses

AMA – Resident & Student Finance – Medical Student Loan Debt in 2021

AAFP – Loan Forgiveness for Medical School Debt

Credit Union Membership for the Mass General Brigham Community

Mass General Brigham EAP – COVID-19 Financial Resources

Mass General Brigham EAP – Resources for College Financing & Loan Repayment Financing 

About the Harvard Federal Credit Union 

HFCU is Harvard University’s not-for-profit financial institution, serving students, faculty, alumni, staff, and Harvard University teaching hospitals. HFCU provides a complete line of services to meet member’s financial needs: HFCU.org. All MGB employees and their families are eligible for HFCU membership.

The Mass General Brigham EAP regularly partners with HFCU to provide education (webinars) about a variety of financial topics. To view HFCU’s Student Loan Repayment and Refinancing session, and other financial webinars, visit HFCU’s online portal.

Contacting the EAP

For confidential assistance with a financial issue (crisis, routine budgeting and financial planning), contact the EAP at 866-724-4327 or request an appointment via our online form.