This is a weird time to live in. I was going to school in St. Paul, MN on 9/11. Like my parents were able to recount with JFK’s assassination and the first moon landing, I can tell you exactly where I was when I found out about the terrorist attacks. It was a time of changes, limits, and uncertainty. And we all survived it. 9/11 is the closest I can come to what we are experiencing now. This, however, is different.
Maybe it is the global impact, or the prolonged uncertainty, the increased social media noise, or perhaps my increased responsibilities, but this pandemic is different.
But it is the same, too. This will pass. Things will return to normal, even if it is a slightly different normal. Like 9/11, we just need to get through this stretch and get to the other side.
The only thing certain about our finances is that they are somewhat uncertain for most of us. Reduced hours. Layoffs. Business closures. It is all going to impact us.
So what do we do about it? In the credit counseling world, we talk about ‘emergency budgets’. This is an adjustment to our spending that reflects a change in circumstances and protects us for the future.
There are a LOT of directions I could go with this. Today, I specifically want to talk about adjusting your student loans. For those that have them, they can be a significant cash outlay every month.
But you do have options.
First, the hard ones. Private student loans. These tend to have fewer options. One of the benefits of the far-reaching impact of the pandemic, however, is that more and more businesses are being understanding with their clients. Especially if you have a change of income, be talking with your private lenders BEFORE you are late with a payment. Explain to them what is happening in your life, and ask for specific solutions. They may or may not give you what you are asking for, but you never know until you ask.
Federal student loans, on the other hand, give us many more options for adjustments.
A fairly easy option that nearly all federal student loans will qualify for is going to an income-driven payment. You will have to report your income, location, and family size, but they will then calculate a payment for you based on your available disposable income. While there are no hardship requirements to move into this payment option, you may qualify for a payment as low as $0 and still be considered current on your student loan.
Another option that borrowers have with federal student loans is to go back into deferment or forbearance. With slightly different requirements, they both allow you to not make payments for a period of time, much like your initial 6-month deferment right after you finished school. Do be aware that your loans may still be accruing interest during this time. But that may be a small price compared to going into default with your loans.
So how do you go about this?
You can find a ton of information at StudentAid.gov.
You can find out about the different payment options. You can learn about the differences between and requirements for deferment and forbearance. They are laid out on their Temporary Assistance page. You can also log in to the National Student Loan Data System through which you can apply for these different options.
Yes. This does potentially prolong and even increase the overall cost of your student loans. But in times of crisis, we sometimes have to prioritize where our money is going. That is what these federal student loan options provide you the freedom to do.
Finally, there are some temporary measures that are being proposed and approved. Because these are changing daily, I am going to direct you to the Department of Education’s web page for the latest information.
If you would like someone to talk through these options and help you establish an emergency budget, the counselors at the Center for Financial Resources are still here and helping people. In addition to face-to-face appointments, We have and continue to offer appointments via phone and the internet. We can help you with your finances while still respecting social distancing and quarantines. You can schedule an appointment by calling us at 605-330-2700 or by visiting our website.
written by Breck Miller, Community Relations Coordinator
image courtesy StudentAid.gov
LSS Center for Financial Resources
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