Americans are facing the most dire financial situation since the opening days of the Great Recession in 2008. In fact, Goldman Sachs suggested that unemployment claims hit more than 2 million in a short period of time. Treasury Secretary Steven Mnuchin ominously warned that the U.S. could experience a 20 percent unemployment rate. Mnuchin clarified that this scenario could occur without intervention, but later walked back his statements.
Widespread layoffs have many people with student loans worried about making payments. Fortunately, President Trump suspended payments for federal student loans on Friday. The freeze is in place for 60 days, but could be extended. You can reach out to your loan servicer to take advantage of this change of events.
The economic impact of the coronavirus pandemic could last for many months. Some people affected by the crisis may be unable to find work for a long time. If you recently lost a job, and want to explore additional options for lowering or halting payments, then you should continue reading this blog.
Using an Economic Hardship Deferment
You may be able to use the Department of Education’s economic hardship deferment. This option will temporarily postpone payments for up to six months. During this time, your subsidized loans will not accrue interest. You can use an economic hardship deferment up to six times, for a total of three years.
Interest accrues on unsubsidized federal loans under normal circumstances. You can opt to make interest-only payments if you have loans that accrue interest and the freeze on payments and interest subsides. If you have at least some income, then you could pursue this option. There are no indicators for how long the freeze is going to last.
Whether you qualify for an economic hardship deferment depends on the circumstances. You must submit the proper forms to your loan servicer and demonstrate that you are going through financial hardship. We have blogs on our website that can help you determine who is servicing your loans and which types of loans you carry.
Income-Driven Repayment Programs
Another potential option is to enroll in an income-driven repayment plan (IDR plan). The Department of Education offers four of these programs. IDR plans limit your monthly payments to a percentage of your discretionary income.
However, having income is not a requirement for enrolling. If you are eligible for these programs, it means you can set your payments to $0 a month while you look for another job.
There are requirements for enrolling in one of these plans. First, depending on the type of loans you have, you may be eligible for some IDR plans but not others. Second, your loans must currently be in good standing. We encourage you to read our blogs on loan rehabilitation if your loans are currently in default. There are ways to bring your loans out of default so you can enroll.
You may already be using an IDR plan to service your loans. If this is the case, then you can recertify after your job loss to reduce your student loan payments. We have several blogs about how to recertify on our website.
Contact Our Kansas City Student Loan Attorneys for Help
The current situation could last for quite some time. Many businesses may be unable to resume normal operations for weeks or months. We encourage you to continue following our blog updates throughout this crisis.
You may be able to take advantage of additional options if you are struggling with student loan payments or other debts. Our Kansas City student loan attorneys can help you look at options for debt relief. To set up a consultation with us, call (816) 281-6349 or use the contact form on our site.