How recent graduates facing a tough job market can manage their student loans

Close to graduation? Finding a job can be difficult. Here’s how to manage your loan payments while you wait. (iStock)

The coronavirus pandemic has had a huge impact on the US job market. According to the most recent figures from the Bureau of Labor Statistics, non-farm jobs have declined by 9.9 million since February 2020, and about 6.3% of Americans are currently unemployed.

For students on the cusp of graduation in May or June, this offers a bleak future. They might worry about how they will find a job, pay the bills, or in many cases pay their student loan bills once they start to fall due.

If you’re in that boat – about to graduate and with student loans in tow – you’re not without options. It is helpful to use an online resource like Credible to determine which option is best for your personal situation.. There are many ways to weather the storm and stay on top of those student loan bills while you do it.

How to manage student loans in a tough job market

If you have federal student loans, you’ll have a little leeway before you have to start making payments. Thanks to a decision by the Biden administration earlier this year, federal student loan borrowers don’t have to make payments until after September 30. The loans will also not accumulate additional interest during this period.

That said, you will still need a plan for these October 1 payments. Fortunately, federal loans come with a number of options, including deferral, various repayment plans, and income-based repayment, which base your monthly payment on your earnings.

“This means that even after September 30, if the borrower is still unable to find a job and has no income, their monthly payment obligation will likely be reduced to zero,” said Ross Riskin, professor. Fellow of Taxation at the American College of Financial Services.

Another advantage? If you find a job in a public service field, like teaching, for example, you can potentially get full forgiveness on your federal loans (under the Public Service Loan forgiveness program).

Is refinancing a good option?

If you have private student loans, refinancing might be something to consider. While you can refinance a federal loan, that would mean losing all of the benefits of those loans, including the payment break until September 30 and the income-tested and civil service rebate programs mentioned above. .

The administration is also considering forgiving between $ 10,000 and $ 50,000 in federal student loan debt – another reason to keep those federal loans if you have them.

With private loans, however, refinancing can have big benefits. On the one hand, it could lower your interest rate, drastically reducing the long-term costs of the loan. It could also significantly reduce your monthly payment, especially if you choose a longer term loan than the one you currently have.

Finally, refinancing can increase cash flow, which is essential if you are unemployed or in financial difficulty.

Perhaps now is the perfect time for new graduates with private loans and borrowers with existing private loans to consider refinancing to lower the cost of their loans, increase cash flow and be able to divert funds toward other financial goals, ”Riskin said.

The downside to refinancing is that it comes with various costs and fees. You will also need to have good credit to qualify. Fortunately, shopping around for your refinance can help. Rates, eligibility requirements and standards tend to vary from student lender to student lender, so using a tool like Credible to compare your options can make sure you get the best deal for your needs.

Before going ahead, you should also use a student loan refinance calculator to get an idea of ​​what your new monthly payments will be and how much refinancing could save you monthly and over time.

The bottom line

If you’re worried about getting a job and paying off your loan after you graduate, you have a choice. If you have federal loans, take advantage of the payment break that has just been extended to September and use that time to move forward.

If you are a private borrower, think about refinancing, and be sure to shop around. Using a tool like Credible to compare lenders can ensure you get the best rate and the best possible term.. You can also use Credible for get prequalified refinancing offers without hurting your credit score.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.

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