According to statistics, unemployment has grown by a higher margin in just three months under COVID-19 than during the last two years of the Great Recession. By the end of February, only 6.2 million Americans had filed for unemployment. In May 2020, this figure swelled to 20.5 million. This exponential rise has been this era’s highest.
During this time, the unemployment rate for women was a lot higher than the same for men. Students who were already struggling to pay their student loans got affected even further. In this post, we will discuss various options that could help you repay your loans if you’ve recently lost your job.
No matter which part of the US you’re in, you should know your rights under federal and state law. The US Department of Labor offers several unemployment benefits that may help you pay your bills until you can find work again. The application process and benefits policies vary from one state to another. The details and particulars can be found on the official website.
Over the past few months, new policies have surfaced to help individuals deal with the pandemic’s economic fallout. In March 2020, President Donald Trump passed the $2.2 trillion economic stimulus bill known as Coronavirus Aid, Relief, and Economic Security Act—or the CARES Act. This law extends to all classes of the society that were previously not eligible for unemployment benefits. It now includes self-employed individuals and gig workers too.
Image address: Student-loans
Alt text: An illustration representing student loans
As cited by Forbes, the CARES Act offers the following protections for those who have been unemployed:
- The Pandemic Unemployment Assistance (PUA) program extends the already-existing unemployment benefits to independent contractors, freelancers, and self-employed individuals.
- The Federal Pandemic Unemployment Compensation gives all the recipients an extra $600 per week, other than the standard, state-determined benefits.
- The Pandemic Emergency Unemployment Compensation (PEUC) provides funding to the states to provide additional compensation to the citizens after their regular compensation comes to an end.
At the same time, several financial institutions and creditors are working to ease your financial obligations. The Consumer Financial Protection Bureau has updated a list of resources on its website to help you make better financial decisions during the pandemic. If you want to apply for any of these benefits, you’ll have to inform your creditors before you’ve missed your payments. Under the revised government guidelines, anyone under the obligation of a federal student loan can postpone their payment without any interest until September 30th. Similarly, the law also protects homeowners with federally backed mortgages from being subject to foreclosures. According to the leading credit bureau Experian, if you are undergoing some financial hardship due to the COVID-19 crisis, you can apply for mortgage forbearance.
Image address: Documents
Alt text: Important documents regarding a borrower’s credit profile
- Do you qualify for these benefits?
It would help if you did your research before applying for any of these unemployment benefits. In most cases, the state decided whether you’re eligible for both the regular compensation and extended benefits. You need to check what your state considers ‘unemployment.’ The definition also differs across states.
Furthermore, if you’re applying for protection under CARES law, you need to fulfill the following eligibility criteria:
- Either you or a member of your household has been diagnosed with COVID-19.
- You provide care to a family member or a child who can’t go to their childcare center because COVID-19 has forced it to shut down.
- You can no longer go to your place of employment as a result of lockdown restrictions.
Rework your budget
When resources become limited, you can no longer spend like you used to. If you’re not already operating on a budget, now is a great time to draft one. It’ll help you reanalyze where your money is coming from and where you’re overspending. You can take a closer look at your budget and know where you have to pause. Discretionary spending like food delivery or buying new clothes can take the backseat until you can have a steady stream of income again. If there are recurring expenses that can be avoided, get them canceled. These include magazine subscriptions and gym memberships too.
While you’re reworking your budget, don’t skip your bill payments. Your finances may feel stretched if you’re unemployed, but missing payments would further hurt your credit score and cost you a lot of late fees. Experian recommends at least paying the minimum due amount on your credit card.
Image address: Recession
Alt text: Graphical representation of economic downturn
Refinance your loans
If you’ve recently lost your job due to the pandemic, you’ll need some help from a cosigner to refinance your student loan. This will increase your chances of qualifying for the refinance. In this case, your cosigner will be legally responsible for the debt obligation. By helping you refinance, the cosigner enables you to save up on the interest expense associated with the loan.
Here’s how student loan refinancing works:
Under this scheme, you get to consolidate your existing private and federal student loan into a new and single loan. This new loan bears a lower interest rate compared to what you were initially liable to pay. Even the monthly payable amount is smaller. In short, refinancing helps you pay your student loans faster. You can also speak to your loan refinancing institution and increase the total term of the loan. This would help you save up on money for other living expenses.
Education Loan Finance is one of the leading student loans and refinancing providers in the USA. The company is known for its low-interest rates and easy repayment schedules. They have over thirty years of experience in helping students pay back their student loans. ELFI believes in rewarding financially responsible borrowers with the lowest possible rates.
If you have any more questions about student loans, you can visit the website and get in touch with a representative.