After months of deliberation in the White House, nurses may have a new option for seeking debt relief on their student loans. This week, current and former students around the nation celebrated following the announcement that the Biden Administration was going forward with its Student Loan Debt Relief Plan. Although it was a slimmed-down version, the Plan could potentially help millions of student loan borrowers.
President Biden, Vice President Harris and the U.S. Department of Education released details about the Student Loan Debt Relief Plan on Wednesday, August 24, 2022, which actually includes three parts. Nurses and other medical professionals with earnings under the income thresholds could be among those who qualify, including travel nurses and allied health professionals who may think they earned too much. To learn what the program might mean for you as a healthcare professional, how it works and if you qualify, keep reading.
Part One: Final Extension of Student Loan Payment Pause
The first part of President Biden’s announcement was a final extension of the pause on student loan payments due to the economic challenges caused by the COVID-19 pandemic.
The CARES (Coronavirus Aid, Relief and Economic Security) Act temporarily suspended mandatory student loan repayments on all loans held by the Department of Education on March 13, 2020. Although September 30, 2020, was the initial expiration date for the repayment pause, the former and current POTUS extended the expiration date several times. It would have expired on August 31, 2022, had President Biden not included a final extension to the new debt relief plan.
The final extension is to help ensure a smooth transition and prevent defaults when repayments resume. The student loan payment pause now expires on December 31, 2022. Like previous extensions, you don’t have to do anything to extend the pause on your student loan payments. It occurs automatically.
For those who don’t qualify for loan forgiveness, be prepared for your payments to resume sometime in January 2023. You should receive some type of notice or billing statement a few weeks before your first due date.
Part Two: Determining Eligibility
According to the New York Times, 45 million people across the country owe around $1.6 trillion in federal student loans they obtained to pay for their college educations. A Department of Education analysis indicates that the typical undergraduate student who took out loans may graduate nearly $25,000 in debt. However, students earning a Bachelor of Science in Nursing can rack up a total ranging from $40,000 to over $200,000 for a standard four-year program, including tuition, program fees, high-cost nursing textbooks, uniforms, supplies, etc.
“Some nurses have upwards of $200,000 in student loans, an amount that would take decades to pay off,” said Kate Morin, an ICU nurse with over eight years of experience in both the surgical and medical realms of critical care. “The high cost of nursing school is a deterrent to many wanting to enter the field, which has huge implications when the country is facing a nursing shortage. I think this loan forgiveness program could potentially lure more people into healthcare, something that’s desperately needed right now.”
To be eligible for student loan debt forgiveness, your annual income must be less than $125,000 if you’re a single borrower or $250,000 if you’re married or file taxes as head of household. If you’re income-eligible, the Student Loan Debt Relief Plan may cancel up to $10,000 in federal student loan debt for those who didn’t receive a Pell Grant. For low-income borrowers who received Pell Grants, it cancels up to an additional $10,000, for a total cancellation of up to $20,000. Income eligibility is based on the total income you reported in 2020 or 2021.
Those who qualify by income must also qualify by loan type. Student loans must have been issued under the William D. Ford Federal Direct Loan Program. These loans include Direct Stafford Loans and all Direct subsidized and unsubsidized federal student loans. Parent Plus and Grad Loans received under the Direct Loan Program are also eligible for student loan relief.
However, if you have a Federal Family Education Loan, those are held with a private company, not the government, and aren’t currently included in the Student Loan Debt Relief Plan. This may change in the future. For now, you might consider consolidating your loans into the Direct Loan Program to ensure your loans can be included in the forgiveness program now versus later.
Nursing Salaries and the Student Debt Relief Plan
Determining whether you qualify is pretty straightforward for staff nurses and allied health professionals, but travel nurses may struggle to make that determination. Because of how nursing salaries are set up, you may assume you earn too much as a travel healthcare professional to qualify for this student loan relief program. Don’t count yourself out until you look at your taxable and untaxed wages to calculate what’s truly considered income.
“Despite the fact that many nurses took travel assignments last year, some may qualify because income is only measured based on your taxable hourly wage,” said Rachel Norton, a registered nurse and long-time travel nurse who worked many hours on the frontline during the pandemic. “Your untaxed housing and per diem stipends aren’t reported on your W2s. The only reported income is the taxed per hour rate stated in your contract.”
Morin, who’s spent the last four years of her nursing career working as a travel nurse in various cities, hospitals and intensive care units, explained that “travel nurses have two separate income streams. One in taxable income and one in untaxable income. The taxable income is the normal hourly rate, while the untaxable income, also called a stipend, is a chunk of money given to pay for food, housing and transportation as they travel to and live in different locations in the U.S.”
“Generally, travel nurses make a very low hourly rate, sometimes as low as $13 an hour,” Morin said. “But when combined with the stipend, the total wage is quite livable. Since only the hourly, taxable rate appears on a tax return, many travel nurses could still qualify for student loan forgiveness.”
Part Three: The Future of the Student Loan System
The final component of the Student Loan Debt Relief Plan isn’t set in stone, but if implemented, it would help current and future borrowers better manage the repayment of their student loans. The Biden Administration proposed new rules to the income-driven federal loan repayment plan to substantially reduce payments for low-income and middle-income borrowers.
Under the proposed changes, borrowers would be required to pay no more than 5% of their discretionary monthly income on repayment of undergraduate loans instead of the current 10%. It would also raise the amount of non-discretionary income to ensure borrowers earning less than 225% of the federal poverty level would have a $0 monthly payment.
Borrowers with loan balances of $12,000 or less would have their loans forgiven after making 10 years of payments instead of 20 years under the new rules. Proposed changes would also cover borrowers’ unpaid monthly interest, so their balances wouldn’t grow as long as they’re making their monthly payment, even if their monthly payment is $0 due to having a low income.
Can Nursing Student Loans be Forgiven?
Student loans up to the allowable amount can be forgiven for nurses and allied health professionals who fall within the income limits. Healthcare workers trying to determine whether they should seek student loan relief should look closely at their salaries, especially travelers. Although the highest paying allied health specialties and advanced practice nursing roles probably won’t qualify, many others may come in under the wire.
Vivian lists the average hourly rate for perm RNs at $37.24 based on Bureau of Labor Statistics data, working out to about $1,490 per week in a 40-hour workweek or about $77,459 annually. Travel nurses earned about $2,644 weekly based on active jobs in the last 90 days. At this average, travel nurses who worked all 52 weeks in a year would have earned nearly $137,500. However, travel nurses rarely work every week as they enjoy vacations or take some downtime in between contracts.
Furthermore, it’s unlikely that this amount is all reportable taxed wages if the travel nurse claims a permanent tax home. Because weekly travel rates often include a blended rate of tax-free stipends and taxable hourly wages, the income listed on your W2 is much lower than what you actually receive each week. The tax-free portion reimburses you for duplicated living expenses. Thus, it’s not counted as income nor reported on your W2. If you don’t currently utilize an accountant, talk to a tax professional familiar with travel nursing wages who can help you understand how taxes impact your travel salary and total income.
The quickest way to determine if your salary was low enough to qualify for the Student Loan Debt Relief Plan is to look at your total income on your 2020 or 2021 income tax return (Line 9 on Form 1040). You should apply if this amount is less than $125,000 for single filers or $25,000 for married or head of household filers. It’s likely you’ll be granted debt relief.
Travel nurses who took crisis contracts in 2021 paying well above the average and spent several months working these high-paying contracts may not qualify for the Student Loan Debt Relief Plan. Many crisis contracts paid much higher taxable hourly wages with fewer tax-free stipends, so those nurses’ total incomes would likely be too high to meet income eligibility rules. However, higher-income nurses looking to wipe out some student loan debt have other loan forgiveness options.
Other Nursing Student Loan Forgiveness Programs
There are several nurse student loan forgiveness programs for those who don’t qualify for the new debt relief plan and for those who do. Each loan forgiveness program has its own set of rules, including some that don’t include income as a factor. A top choice that all nurses, healthcare workers and other public servants should look at closely is the Public Service Loan Forgiveness (PSLF) Program.
The Biden Administration revamped the PSLF in October 2021, making it easier for qualified public servants who’ve made 10 years of payments to request a full discharge of their student loans. Through a limited waiver, nurses and others serving their communities may be eligible to have all their student loans forgiven if they’ve made 120 monthly payments, even if they weren’t made consecutively, on time or for the full amounts due. Previously, applicants must have made 10 consecutive on-time payments for the total amount due.
A simple government tool automatically tells you whether you qualify for the improved program, but don’t delay. The more lenient rules are only temporary. You must apply before October 31, 2022, to take advantage of these time-limited changes to the PSLF program.
Sign Up for Loan Forgiveness Updates
The exact rollout of the Student Loan Debt Relief Plan application isn’t entirely certain. Millions of student loan borrowers may receive debt relief automatically because the Department of Education already has access to relevant income data for these individuals. If the Department doesn’t have your income data or you’re unsure whether it does, the Administration will launch an application before the federal student loan repayment pause expires at the end of the year. If you’d like to receive a notification when the Student Loan Debt Relief Plan application becomes available, sign up for Federal Student Loan Borrower Updates on the Department of Education subscription page.