How to handle 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's no denying that the coronavirus pandemic has been financially difficult on many Americans, especially those who have to make monthly student loan payments. Fortunately, there is help available.
At the beginning of the pandemic, Congress passed the CARES Act, which effectively paused payments and stopped interest from accruing on federal student loans through the end of September. The Trump Administration extended the measure and President Biden extended it even further. Notably, Biden has also called for $10,000 in federal student loan forgiveness.
How to manage student loan payments
Still, these measures are a work in progress and many student loan borrowers are struggling. However, there are some effective ways to manage your student loan payments during the coronavirus pandemic. Keep reading to learn 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 have the means to keep making your student loan payments, you should continue to do so. Unfortunately, only federal student loan payments have been paused during the pandemic. If you have private student loans, missing a payment could negatively impact your credit score.
That said, even if you do have federal student loans, it's in your best interest to keep making payments if you can. Since no interest is accruing on your loans right now, continuing to make regular payments will help you pay down your loan balance much faster than you would be able to normally.
We would also caution against waiting for student debt cancellation to chip away at your loan balance for you. Though Biden has said that he supports a certain amount of forgiveness, nothing has been decided. It could be a long time before we see true student loan forgiveness take place.
If you have private student loans and don't qualify for student loan forgiveness, then you'll want to consider refinancing your student loans. Credible can walk you through the process and help you determine if it's the right move for you.
WHAT ARE STUDENT LOAN REFINANCE RATES?
2. Refinance private student loans
Additionally, if you have private student loans, you may want to consider student loan refinancing. In the past few months, the Federal Reserve has lowered the Fed Funds rate to nearly zero, which means that eligible borrowers can gain access to rock-bottom interest rates when they refinance private student loans.
In general, it is a good idea to refinance student loans, if you want to switch from loans with variable interest rates to options with fixed interest rates. Alternatively, refinancing can be a good idea if you want to condense it into one loan payment.
If you think refinancing might be the right move for you, visit Credible to compare rates and lenders.
You can also use their student loan refinancing calculator to get a sense of how much you could stand to save if you refinance your student loans.
That said, it's generally not a good idea to refinance federal student loans. Put simply, private student loans do not offer the same flexibility as a federally-backed option. For example, private student loans don't offer an income-driven repayment plan.
With that in mind, it's best to verify that your loans are privately held before you refinance a student loan. Unfortunately, once you transition out of a federal loan, you will only be able to access private options from that time forward.
REFINANCE YOUR STUDENT LOANS NOW TO SAVE THOUSANDS
3. Talk to your lender about a forbearance plan
Lastly, if you have private student loans and you're having trouble keeping up with your payments, talk to your lender. Many loan servicers are offering student loan forbearance plans in light of the pandemic, which could allow you to pause your payments for a set period of time. Best of all, if you skip payments while under forbearance, they won't negatively affect your credit history.
Keep in mind, however, that a forbearance plan is not the same as student loan forgiveness. You will have to make up for any payments eventually. Usually, any missed payments are simply tacked on to the end of your loan at the end of your forbearance period.
It’s also important to note that whether a forbearance plan is available to you will depend on your lender. That’s why talking to your lender is so crucial. Even if you don't qualify for a forbearance plan, they will be able to give you a better sense of the options that are available.
5 THINGS TO DO WHEN STUDENT LOAN FORBEARANCE ENDS
The bottom line
In the end, managing your student loans during the coronavirus pandemic is all about educating yourself on your options. Whether you have federal student loans, private student loans, or a mixture of the two, there are options available to help you during this time of financial instability.
You simply need to do the research on which path makes the most sense for you to take. Credible can connect you to loan officers who can answer any refinance-related questions you might have if you choose to go in that direction.