The average American faces a debt crisis at some point in their lives. With a national total consumer debt of $14.1 trillion and student loan debt soaring to $1.6 trillion, it’s no wonder that many Americans are struggling to pay off their mounting loans.
The thought of repaying your loans may be stressful, but the longer you go without addressing the issue, the more it’ll worsen. For many people, the growing burden of loan repayment starts to take a toll on their lives, putting a hold on their future plans as they try to pay off their increasing debt.
Dubbed the “disastrous domino effect,” this impact is felt in your retirement funds, monthly savings, as well as marriage, children, and travel plans. While managing your finances on a strict budget—and an annual income that barely surpasses the yearly debt repayment—can be difficult, repaying your loans is essential to managing your finances.
Having to manage your finances and living debt-free is difficult on its own, but adding a global health crisis to the mix doesn’t help your case either.
The spread of the novel coronavirus across the globe has created an unprecedented, and unforeseen, economic crisis. Undoubtedly, the humanitarian impact of the pandemic is enormous—but the economic impact is inextricably tied to your health and wellbeing too!
Where Do We Stand?
As the pandemic sweeps through our country, people are responding to the health and safety guidelines to keep themselves—and others around them—safe. Unfortunately, these preventive measures can take a toll on economic prosperity and business functioning.
The response to the spread of COVID-19 has been swift and necessary. Businesses of all sizes are responding to the unique crisis by temporarily shutting down their business, reducing their hours of operation, or changing the way they do business.
With people observing social distancing and stay-at-home orders across the country, businesses and organizations are experiencing diminishing sales, falling net profits, and mounting fixed costs. In the wake of this pandemic, many brick and mortar businesses are filing for bankruptcy and fearing permanent closure.
When business continuity is teetering to a halt, you may anticipate furloughs, layoffs, or pay cuts as they try to reduce costs. These dire economic times have led to surging rates of unemployment and greater financial instability than ever.
If you’re someone who relies on a monthly paycheck to meet your expenses—just like 78% of people surveyed by CareerBuilder—you may be feeling the pressure of the oncoming economic crisis.
What Does This Mean For Your Financial Obligations?
COVID-19’s impact on the global economy will be far-reaching and brutal—just as its spread was.
Unemployment, diminishing savings, and a strain on the market will inevitably affect how you deal with your financial obligations too. At a time when you’re having trouble making ends meet, setting aside money to repay your student loan or credit card debt may not be possible.
Some of the ways you can manage the onset of this economic crisis are:
See where you stand
Financial duress can be difficult to go through, especially when it’s intertwined with an ongoing global crisis. Getting your bearings and understanding where you stand in terms of your assets, income, and financial obligations will give you a clearer picture of what you need to do.
Owing an average of $29,200, college graduates can take up to 20 years to repay loans in regular circumstances. However, the current crisis has changed the way people are dealing with their student—and other—loans. If you’re lucky, you may be able to get some loan relief from federally-supported programs such as the CARES Act.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act enforces temporary payment suspension for people who are unable to repay their debts at this time. While loans aren’t forgiven, they’re pushed back to September 2020 instead.
Get a grip on your loan by looking into the CARES Act and finding out whether you’re eligible. The relief is applicable to principal and interest payments on student loans that are federally—and not privately—held only!
Take advantage of low interest rates
In response to the coronavirus outbreak and the resulting economic downturn, the Federal Reserve slashed its benchmark interest rate to near zero. This attempt at propping up the economy is beneficial for borrowers who have to continue to repay their loans.
If you’re someone who plans on repaying your credit card or privately-funded student loans, you can take advantage of this change by paying lower interest on the principal amount. As long as your loans have a variable interest rate, you’re likely to experience some relief in your loan repayments.
Lower interest rates mean you’ll end up saving more on your college debt repayment than you would have otherwise!
Refinance your student loans
When insurmountable student loans start to bog you down and the fear of defaulting on your repayments is looming, refinancing may be your best bet. With one-third of adults—between the ages of 18 and 29—living with student loan debt, refinancing is a viable option for some much-needed reprieve.
This strategy allows you to pick the terms of repayment that suit your needs best. Whether you want to spread the loan repayment over a longer period of time or are looking for lower, more competitive rates, Purefy can help you find the best solution for your needs.
As long as you have strong credit, meet the eligibility requirements, and have a job or savings that allow you to make the monthly payments, you’ll be able to take advantage of refinancing options. At a time when cutting down on your existing expenses is necessary, and with financial instability in the foreseeable future, Education Loan Finance’s student loan refinancing qualifies you for better loan terms.
In the midst of this public health concern, you may be left wondering how you’ll see through your financial obligations. Fortunately, there are certain options you can explore to avoid defaulting on your loans and drowning in even more debt than you were in already!
About Author: The author has helped numerous prospective college students through student loans, parent loans, and refinancing options. With experience in student loan refinancing, borrowing, and financial advisory company, they understand just how much a good college experience is worth.