Many student loan borrowers are ineligible for coronavirus relief – Orange County Register

Emily Talcott breathed a sigh of relief last month when she learned that federal student loan borrowers would get some relief under the $ 2,000 billion CARES Act, which President Donald Trump signed on March 27. to help Americans financially affected by the coronavirus pandemic.

But that relief quickly turned to panic when Talcott learned that she was one of the millions of Americans whose student loans are not covered by the current federal aid program.

Since graduating from veterinary school 12 years ago, Talcott, 43, has paid nearly $ 2,000 a month for her federal loans, having only taken a brief forbearance ago. seven years old when she was confined to bed while pregnant with her twins. And she wants to keep paying off the debt she incurred to pay for the education that led to her dream job at a veterinary clinic in Placentia.

But when the coronavirus hit, Talcott lost his side job with a nonprofit animal group. Then she started hearing from colleagues who were made redundant or saw their wages drop as clinics closed. She feared that her full-time job would be threatened and that she would lose her small home in Fullerton. So the federal government’s promise that borrowers could defer student loan payments for six months without accruing interest turned out to be a lifeline.

When the bill passed, Talcott began logging into his account with his loan service provider Navient, hoping to see the “balance owed” drop to $ 0. But a few weeks passed without change. It was then that she called Navient and heard the news:

Talcott was one of 7.2 million borrowers across the country whose federal student loan debt is not covered by federal debt relief law.

While Talcott had taken out the only federal student loans offered by her veterinary school, she learned that her loans were not direct from the U.S. Treasury. Instead, its loans were part of the decades-old Federal Family Education Loans (FFEL) program in which the federal government guaranteed loans that were actually owned by private banks.

Although President Barack Obama ended the FFEL program in 2010, Taclott and the 7.2 million other FFEL borrowers who still owe a total of $ 169 billion in pre-2010 loans have been left in the same boat. that some 2 million other borrowers who have private student loans and also do not qualify for assistance under the CARES Act.

“The majority of people who went to school and borrowed money before 2010 are probably not entitled to anything,” said Travis Hornsby, founder of Student Loan Planner, a company that helps students. people figure out how to pay off their debts.

When she heard the news, Talcott cried.

“I just couldn’t believe we were being so blatantly ignored. “

Relief for some

The CARES Act has offered relief to some 35 million Americans who owe a total of $ 1.3 trillion in direct federal debt on student loans.

“It sounds too good to be true, but it’s true,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a non-profit organization that offers free advice and advocacy for borrowers. “Congress just moved quickly and created a relief that I had never seen before.”

Alonso Ramirez, 32, of Montclair still owes $ 62,000 after earning his bachelor’s degree in political science and his master’s degree in organizational studies in 2019. And his wife has $ 56,000 in student loans for earning his bachelor’s and master’s degrees in psychology. school. Both qualified for the six-month interest-free deferral program.

“We’re putting the money we would typically use to pay off our student loans into savings,” Ramirez said, estimating that they would save about $ 2,700 with payments suspended until Sept. 30.

Millions left behind

Ramirez and his wife both completed higher education within the past decade – after the FFEL program was phased out.

The program started in 1965. It was not until 1990, when President George HW Bush changed the way these loans were accounted for in the federal budget, that it became clear that taxpayers were spending more on the program. FFEL than for direct student loans. President Bill Clinton pushed for the phasing out of the FFEL, but Congress chose to let universities choose what kind of federal loans they would offer. And because commercial lenders could woo schools in ways the federal government couldn’t, the FFEL program exploded over the next two decades.

In 2009, Obama announced his intention to stop FFEL lending, which he said was for taxpayers to “pay a premium to the banks for acting as intermediaries.” When the program officially ended in 2010, the Congressional Budget Office estimated that its demise would save taxpayers $ 68.7 billion over the next decade.

It is likely that many FFEL borrowers did not realize that their loans did not belong to the federal government. The loans are labeled as either Subsidized or Unsubsidized Federal Stafford Loans, just like direct loans. Interest rates are set at the same levels and they are eligible for an income-based repayment program that is only open to federal borrowers.

Some borrowers have learned the distinction in recent years when they tried to participate in the civil service loan cancellation program, where people who hold specific service jobs, such as teaching or fighting fires. , can obtain the cancellation of their debt after 10 years of payments. It turns out that FFEL borrowers are not eligible for this program either.

With the CARES Act, Hornsby said Congress was in a hurry to pass a relief bill quickly. It would have been more complicated – and would have taken some time – to incorporate borrower relief with federal loans owned by commercial banks, he said. So Congress moved forward, even if that meant that about one in five borrowers would not receive help.

Options for excluded

There are still relief options for those in FFEL debt, including direct consolidation loans, interest-based repayment plans, and unemployment deferral programs. Mayotte encouraged borrowers to do basic research on its nonprofit organization’s sites such as or, and then call their loan service provider to discuss options.

Many lenders, including those with private loans, also offer 90-day disaster tolerance to anyone who needs it. The downside is that interest still accrues during this period.

Talcott was able to put his loans on a three-month disaster forbearance program, but it’s a band-aid, not a solution. In one month, she said, the interest increased the total amount owed by $ 1,000.

“I am very worried about what will happen when the disaster forbearance ends and interest has accrued and I have to start paying again with less income,” she said.

The crooks are also coming out of the woods, Mayotte said. She noted that none of the above relief options should cost money, and loan providers should be able to walk you through the process.

Push for more relief and reform

Other help could come.

On April 22, a bipartisan group of lawmakers introduced the Equity in Student Loan Relief Act, which would extend federal loan relief to FFEL borrowers. Under the bill, the education ministry would pay private lenders to cover loan interest, while payments are deferred until September 30.

But many consumer advocates fear federal leaders assume they’ve dealt with student loan borrowers already and will focus future relief plans on other issues.

Ramirez hopes the federal government will extend the payment hiatus on direct loans until the end of the year.

“Even if the economy experiences a U-shaped recovery, many people will be out of work for months,” he said. “For those of us who were able to keep our jobs during the outbreak, it will help us save money in case a second wave takes our jobs out, or help us put the money back into the economy to help boost the economy. recovery.”

Talcott isn’t optimistic that FFEL borrowers will see relief or more meaningful student loan reform – like an end to predatory interest rates – anytime soon. On the contrary, she said managing student loans during the pandemic has only underscored how complex the system is and how few people really understand it.

Yet despite the burden she sometimes feels because of her student loan debt, Talcott said she was grateful for her education. That’s why, when the coronavirus pandemic hit the United States and she began to fear the worst, she wrote a letter to her 7-year-old twins encouraging them not to accumulate student loans.

“But if you love your career as much as I do, I wouldn’t change a thing,” she said. “Do what you believe in. “

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