How to Manage Student Loan Payments During COVID
Struggling to keep up with your student loan payments during the pandemic? Here’s what you need to know. (iStock)
There is no denying that the coronavirus pandemic has been financially difficult for many Americans, especially those who have to make monthly student loan payments. Fortunately, help is available.
At the start of the pandemic, Congress passed the CARES Act, which effectively suspended payments and prevented interest from accruing on federal student loans until the end of September. The Trump administration extended the measure and President Biden extended it further. Notably, Biden also called for $ 10,000 in federal student loan forgiveness.
How to manage student loan payments
Yet these measures are a work in progress and many student loan borrowers are struggling. However, there are effective ways to manage your student loan payments during the coronavirus pandemic. Read on to find out more.
- Keep making monthly payments
- Refinance private student loans
- Talk to your lender about a forbearance plan
1. Keep making monthly payments
First and foremost, if you can afford to continue doing your student loan repayment, you have to keep doing it. Sadly, only federal student loan payments were suspended during the pandemic. If you have private student loans, missing a payment could negatively impact your credit score.
That said, even if you have federal student loans, it’s in your best interest to continue making payments if you can. Since no interest is accruing on your loans at this time, continuing to make regular payments will help you pay off your loan balance much faster than you normally could.
We also do not recommend waiting for student debt cancellation to reduce your loan balance for you. Although Biden has said he supports some forgiveness, nothing has been decided. It could take a long time for a real student loan forgiveness to occur.
If you have private student loans and do not qualify for a student loan forgiveness, then you will want to consider refinancing your student loans. Credible can walk you through the process and help you determine if this is the right decision for you..
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2. Refinance private student loans
Additionally, if you have private student loans, you may want to consider student loan refinancing. In recent months, the Federal Reserve has lowered the federal funds rate to near zero, meaning eligible borrowers can have access to extremely low interest rates when refinancing private student loans.
In general, it is a good idea to refinance student loans if you want to switch from variable interest rate loans to fixed interest rate options. Alternatively, refinancing can be a good idea if you want to condense it into a single loan payment.
If you think refinancing might be the right solution for you, visit Credible for compare rates and lenders.
You can also use their student loan refinance calculator to get an idea of how much you could save if you refinance your student loans.
Having said that, it’s generally not a good idea to refinance federal student loans. Simply put, private student loans do not offer the same flexibility as an option backed by the federal government. For example, private student loans do not offer income based repayment plan.
With this in mind, it is best to verify that your loans are privately held before you refinance a student loan. Unfortunately, once you exit a federal loan, you will only be able to access private options from that point on.
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3. Talk to your lender about a forbearance plan
Finally, if you have private student loans and are having trouble keeping up with your payments, talk to your lender. Many loan officers offer student loan forbearance plans in light of the pandemic, which could allow you to suspend your payments for a specified period. Best of all, if you skip payments while you are in forborne, they won’t negatively affect your credit history.
Keep in mind, however, that a forbearance plan is not the same as a student loan forgiveness. You may have to make up any payments. Usually, all missed payments are simply added to the end of your loan at the end of your forbearance period.
It is also important to note that the availability of a forbearance plan will depend on your lender. This is why it is so crucial to talk to your lender. Even if you do not qualify for a forbearance plan, they will be able to give you a better idea of the options available.
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The bottom line
Ultimately, managing your student loans during the coronavirus pandemic is all about educating yourself about your options. Whether you have Federal Student Loans, Private Student Loans, or a mix of the two, there are options available to help you during this time of financial instability.
You just need to research the path that makes the most sense for you. Credible can put you in touch with loan officers who can answer all of your refinancing questions. if you choose to go in that direction.
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