How to Manage Student Loans During the Ongoing COVID-19 Pandemic
Apr 10, 2020 16:13
With new COVID-19 cases surfacing each day, the pandemic has created global fear and anxieties around health, income, and loans. According to leading economist Mark Zandi, the coronavirus is expected to obliterate 5–6 million jobs in March alone.
Not only is the COVID-19 recession expected to spike unemployment, but it has also escalated stress levels around student loans. With over 44 million Americans being knee-deep in a total of $1.5 trillion of student loan debt, the current state of the economy doesn’t make loan repayment sound feasible, in the least.
If you’ve been struggling to manage student loans as the ongoing COVID-19 crisis envelops the world in its debilitating grip, we’ve rounded up some effective ways to help you plan ahead.
Familiarize Yourself With the Latest Updates and Take Measures Accordingly
The U.S. Department of Education recently announced the suspension of federal student loan payments for two months. The change applies retroactively from March 13th.
While this has allowed individuals with student loans greater flexibility during the ongoing national emergency, it’s still a restrictive grant that requires additional measures.
The suspension does not make student loans disappear. While Trump announced that the timeline may be extended, the current policy enables borrowers with federal student loans to halt monthly payments for a mere 60 days.
To prevent yourself from being blindsided once the grant period expires, we recommend taking protective measures to effectively manage student loans. Familiarize yourself with the latest updates to determine what actions will help you manage your loans once the suspension period concludes and you begin accruing regular interest charges and penalties.
Moreover, keep up with further amendments to this suspension, as situations like these often lead to perennially shifting policies.
Private Student Loans? You May Want to Look Into Refinancing
While the latest cut in interest rates may sound enticing, we strongly recommend weighing the pros and cons to make an informed decision that benefits you in the long run.
Individuals with private student loans can’t benefit from the new policy by default. Additionally, individuals with federal student loans can either choose to take advantage of the 60-day suspension policy or refinance federal loans.
Ultimately, you can’t benefit from both.
To avoid falling between two stools, make an informed and timely decision that helps you effectively manage and pay off your student loans.
Refinancing is one of the most effective and low-risk ways to lower your student loan interest rates. By getting a lower monthly payment, you’ll effectively manage to use cash for other expenses as the financial crisis continues.
If you’re suffering from job insecurity or unemployment owing to the ongoing situation, we recommend considering refinancing to effectively manage your current finances without being forced into taking an additional loan. In addition, the multiple cuts in interest rates have also reduced rates for student loan refinancing, thereby helping borrowers’ secure even lower interest rates.
According to Forbes, refinancing rates have dropped to 3.1% for fixed and 1.9% for variable student loan refinancing.
If you’re struggling to track multiple student loans, refinancing is an effective way to consolidate your loans, thereby making repayments easier and more manageable.
Customer research indicates borrowers have saved up to $272 each month with student loan refinancing. This amounts to witnessing an average of $13,940 in total savings.
Carefully Re-Evaluate Your Current Loan Application Process
If you’re in the midst of applying for graduate studies, hastily opting for high-interest student loans could end up costing you in the long run.
To effectively manage undergraduate student loans without being overwhelmed by new graduate student loans, we recommend taking things slow and making a cost-effective decision.
Opt for zero-fee postgraduate loans with low interest rates and repayment options to ensure additional security as the period of economic uncertainty continues. Look for postgraduate student loan platforms that offer no application fees and loan origination fees.
By taking additional measures to secure your education without risking financial insecurity, you’ll effectively manage previous loans without feeling pressured by new loans.
Devise and Strictly Adhere to a Budget
Once you’ve finalized your student loan payment plan, we recommend creating a monthly budget that helps you stay on track as the self-quarantine period continues.
While you may feel tempted to splurge on Netflix and order takeout every other day, you could end up hurting your chances of saving money and paying off your loans this way. Strike the perfect balance between prioritizing your mental and emotional health during this period of isolation without breaking the bank.
While treating yourself to overcome the ongoing stress and anxiety is completely acceptable, take strict measures to prevent going overboard.
We recommend drafting and adhering to a budget to ensure your finances emerge from the pandemic unscathed. Budgeting is especially important if you’ve recently lost (or are on the brink of losing) your job owing to inflexible employers.
Additionally, actively search for in-demand jobs that are being offered by empathetic companies in your locality. While the lockdown has increased work-from-home opportunities, there are still many organizations and industries that are refusing to extend that courtesy to their employees.
Actively browse through listings to find an opportunity that fits into your niche and helps you save money as the period of uncertainty continues.
Look for a Secondary Job
If you already have a job with empathetic and flexible employers, looking for a secondary job is a great way to save extra cash. This is especially beneficial and sustainable for individuals with convenient work-from-home jobs that cause little to no disruption.
Whether you branch out and try something different or find a second job in the same industry, you’ll be able to effectively manage your loans.
Here are some occupations with work-from-home flexibility to kick-start your inspiration:
•Social Media Manager
•Computer Support Specialist
•E-Commerce Store Owner
Don’t forget to take your mental health and wellness into account. If you don’t feel capable of taking on a secondary job, we strongly advise against it. Ultimately, prioritize your headspace instead of taking on more than you can handle.
Get in Touch With a Personal Loan Advisor
Feeling overwhelmed? Contact a loan advisor for individualized help with your finances and loan payment plan.
Not only are personal loan advisors equipped with the latest insights, trends, and expertise in student loans, but they’ve also been in a similar position themselves. This gives them a nuanced understanding of how to help struggling students and employees pay off their loans without feeling overwhelmed.
Here are some personal loan advisors you can reach out to for help. With years of experience, they’ll help you navigate the rough terrain and find an effective and viable solution.
About the Author
The author is a renowned student loan specialist at ELFI (Education Loan Finance)—one of the leading private lending companies in the U.S. She loves playing with her French Bulldogs and reading historical fiction novels in her free time. Her passion for helping undergraduate and postgraduate students pay off their student loans keeps her going. Over the years, she’s devised countless powerful strategies to help simplify loan payment for struggling students and borrowers.
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