Canceling student debt will affect nurses—here’s how
In August, President Biden announced a plan to forgive a portion of student loan debt for federal student loans borrowers. The plan provides for a $10,000 reduction for people earning less than $125,000 yearly and a $20,000 reduction for Pell Grant recipients.
In addition to the loan forgiveness portion, the plan also calls for decreasing a borrower’s monthly payment. Previously, monthly payments were capped at 10% of a borrower’s monthly income; the new limit will be dropped to no more than 5%. Lastly, the loan forgiveness plan details improvements to the oft-fraught Public Service Loan Forgiveness (PSLF) program previously available.
The bottom line is this: obtaining a college degree used to mean a ticket towards financial security. These days, it accounts for the heavy financial burden that 45 million people bear in owing a debt to the federal government that has more than tripled in the past decade-plus. For many nurses—one of our country’s most sought after careers—canceling student debt has the potential to be life-changing. We’ll explain how below
Where nursing loan debt currently stands
Many seasoned nurses certainly have their own debt load, but it’s nothing compared to that of nurses who graduated in the past 5-10 years, since the cost of nursing school began skyrocketing. According to the National Student Nurse Association (NSNA ), canceling student debt will affect the majority of new nurses most significantly.
Currently, seven out of ten graduating nurses begin their careers in debt. Nursing is a highly employable field with decent starting salaries for GNs; yet borrowers consistently show that they struggle under their financial burden. Within two years of repayment, currently one in eight default on their loan.
Even for those who manage to make payments on time month-after-month, many become frustrated with how long it takes to get these loans paid off in full. No matter how many months payments are consistently made, the balance seems to hardly budge.
With student loan forgiveness being a trending topic lately, no doubt you’ve all seen the graphics and posts detailing the maddening math of student loan repayment. (In case you are social media-shy, they go something like this: “I’ve made every payment on my student loan for the past ten years and I currently owe $xxx more than the original amount!”) Borrowers who take the time to really summarize their loan amounts in comparison to their payment history on said loans tend to come to the same sobering conclusions.
It is the interest—which, for federal loans, is compounded daily—that has contributed to the student debt crisis in this country. Far surpassing credit card and car loan debt combined, the magnitude of the $1.7 trillion dollars now owed is incomprehensible to imagine. The reality of a debt burden to each nurse, however, is not.
There are currently 5.3 million people working in the nursing industry in this country. Ranging from CNAs to CRNAs, many millions of these nurses have dealt with or are currently dealing with student loan debt. In a time where so many are leaving the profession from stress-related burnout, canceling even a portion of outstanding student debt for our newer nurses is a significant move in the right direction.
The impact of the student loan forgiveness plan on nurses
Nurses just beginning their careers can expect to make at least $70,000/year. Three quarters of these nurses will have—on average—$23,000 in debt from the BSN degrees required by their first jobs. That debt-to-income ratio seems manageable at first assessment. But for some, after cycling through periods of default, forbearance, and grace periods, it’s not uncommon for many borrowers to find themselves trapped in repayment limbo for much of their decades-long careers. In fact, a 2019 Medscape survey found that 20% of nurses over the age of 55 still carry significant student loan debt. Potentially halving that amount—or forgiving it in its entirety—would make a dramatic impact on nurses working right now.
The second aspect of Biden’s loan forgiveness program promises to significantly reduce a borrower’s monthly payments past the $10,000 forgiveness. This sudden increase in discretionary funds will naturally benefit all nurses, but most importantly, it will greatly impact racial equity advancements.
According to the U.S. Department of Education, the majority of Pell Grant recipients (those borrowers being forgiven for $20,000 of their student loans) come from Black families getting by on $60,000 or less annually. Consequently, the loan amounts that Pell Grant recipients tend to need to get through school are significantly higher — meaning they graduate with much more debt.
This cycle directly contributes to the racial wealth gap. Targeting relief to these borrowers by doubling the student loan forgiveness amount available to them is one way to help level this disparity, a conclusion supported by a corresponding Urban Institute study. Representation matters so much in nursing—potential nurses want to become what they can see. We can’t afford to lose anyone in the field now; certainly not our BIPOC nurses that are already underrepresented. Any correction aimed at leveling the imbalance of the racial wealth gap should be encouraged.
Lastly, Biden’s plan pledges to fix the existing PSLF program—the last, much-hoped-for loan forgiveness program that flatlined upon its release. You may recall: under this program, those working in certain environments like non-profits, the military, or for designated government organizations were supposed to have loans discharged after 120 payments.
Until now, the program has been plagued with bureaucratic problems galore; upwards of 99% of applicants were denied outright when the plan went live. To their credit, the Department of Education acknowledges the disaster that was the first version. In the last year, they have already begun unraveling its red tape to the tune of over $10 billion being awarded in loan forgiveness since improvements began. More positive change is promised.
Am I eligible for student loan forgiveness?
Loan forgiveness eligibility is determined by the type of debt you carry. Four types of student loans are eligible for the new loan forgiveness program:
Direct subsidized and unsubsidized federal student loans
Direct Stafford loans
Parent PLUS loans
Grad loans
The program is expected to kick off in mid-October 2022, although an exact date has not yet been specified. Borrowers interested in applying can sign up for forgiveness plan updates here.
One recent change in the program (that resulted from Republican-led lawsuits) is that borrowers with Perkins loans and Federal Family Education Loans (FFEL) are now barred from the forgiveness plan. These loans, while technically being government-guaranteed loans, were ultimately arranged by private banks. The suits argue that forgiving debt would therefore unfairly lower revenue for these banks. Can we also take this opportunity to remind you to vote in the midterms coming up?
Tips to help you with your loan
In addition to the loan forgiveness program, there are several strategies to help you stay ahead of your student loan debt, and/or pay it off more efficiently.
Look into tuition forgiveness through your employer
Adjust your repayment schedule
Refinance with a private lender to pay loans off faster
Take advantage of the Student Loan Pause which has been extended until 2022’s conclusion.
Are you a prospective nursing school student? Get ahead of the game—we’ve got a great guide to look at regarding tuition repayment options here!
The bottom line
For all these reasons and more, Biden’s student loan forgiveness plan stands to significantly lessen the debt burden on nurses - especially new nurses and recent graduates. At a time when we so desperately need more nurses - and retain the experienced nurses already in the field - loan forgiveness contributes a valuable win for our uber-stressed workforce. It’s not the end-all-be-all solution, for sure; as we’ve written about many times, higher pay, safer staff-patient ratios, stronger benefits, and simply showing nurses respect for the hard work we do are all important pieces of the puzzle.
But - if you’re a recent nurse grad or seasoned nurse still saddled with debt - be sure to take advantage of the upcoming loan forgiveness program. Nursing is a rewarding - and challenging - career, and some financial relief could make all the difference.