How To Manage Your Student Loans In The Coronavirus Crisis

The United States – and the world as a whole – is faced with an unprecedented dilemma as we attempt to stop the spread of the novel COVID-19. While there are city-wide lockdowns, many people worry about how they will back their bills, including the 44 million Americans that collectively carry around $1.7 trillion in student loan debt. Here are some options for student loan borrowers as the Coronavirus crisis deepens.

Deferments and forbearances are programs that allow borrowers to temporarily pause payments on their student loans but remain in good standing during times of economic hardship. Usually federal student loans have significantly more generous payment deferral options than private loans. While typically interest still incurs during times of deferment, President Trump recently announced an interest freeze for government-held federal student loans, so this may not be the case in today’s crisis.

Federal student loan borrowers who are currently not in an income-driven plan can apply to switch into one of these plans due to changed circumstances, such as being laid-off. These types of repayment programs may be better solutions in this type of hardship situation than a deferment or forbearance, since the plans are renewable year after year. If a borrower is already on an income-driven repayment plan, they can request a recalculation of their monthly payments at any time due to changed circumstances.

Private student loans usually have fewer options than federal student loans do during times of hardship, but some provide lowered payments, though it is a discretionary practice. In some cases, a temporary reduction in payments may lead to higher payments later when the temporary modification ends, so make sure you understand the terms and consequences of your modification. 

See Adam S. Minsky, Esq., How To Manage Your Student Loans In The Coronavirus Crisis, Forbes, March 17, 2020.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.