How to Balance Financial Challenges and Student Loans in a COVID-19 Economy


| For Employees | May 14, 2020

Surprised, frustrated, stressed, and worried describe Americans’ responses to the Coronavirus (COVID-19) pandemic. Many people are anxious about getting sick from the virus and stressed about their financial welfare due to losses of jobs and investments.

The economic impact of the pandemic has caught many people by surprise. Nearly one-fourth of Americans have filed for unemployment assistance. Financial experts report that even before the pandemic attack, about 49% of Americans were already living paycheck to paycheck. So many people have little to no savings to weather financial difficulties. In addition, about 44.7 million people also are worried about their student loan debt payments. Fortunately, the federal government has suspended most student loan payments for six months.

Here’s how people can balance these financial challenges and their student loans in a COVID-19 economy.

Reorganize your finances

Economists predict the impact of the pandemic could be diverse, affecting people of all ages in every state and industry. Regardless of whether you kept your job, were furloughed, or laid off, it’s essential to take stock of your finances to prepare for economic changes.

About one-third of Americans don’t live on a budget. But developing a budget plan can help ease financial stress. Here are some tips for creating a budget:

  1. Identify fixed costs – Make a list of your fixed-cost monthly living expenses, such as home mortgage and car payments, utilities, groceries, childcare, and insurance.
  2. Check student loan debt payments – For people with student loans, this is another fixed cost. The new CARES Act suspends monthly loan payments at least through Sept. 30, 2020. But this only applies to borrowers who have direct loans or Federal Family Education Loans held by the federal government.

    Other loans are not eligible for the benefit, including those held by a commercial lender, federal Perkins loans or private loans with an interest rate higher than federal loans. Contact these lenders about payment options available during COVID-19.

    People with student loans who are working should check with their employer about loan payment assistance. Under the CARES Act, through Dec. 31, 2020, employers can provide up to $5,250 toward their employees’ student loan payments as a non-taxable benefit. BenefitEd can help employers set up and administer this benefit.

  3. List discretionary spending – Make a list of costs of the nice-to-have discretionary items you buy, including clothing, dining out, fitness and recreation, hobbies, or self-care services.
  4. Categorize income sources – List all sources of income, including contract, part- or full-time work. If you have qualified for unemployment benefits, tabulate the amount you’ll earn each month, and how long you’ll have access to these funds.

    If you are called back to work or find a new job, the hourly rate or salary could be less than the amount you previously earned. Look for other side-jobs to supplement your income on a short-term basis until the economy improves.

    Finally, don’t forget to include other income options you could tap into. These may include your home equity, 401(k), Certificate of Deposits or annuities.

  5. Review delayed payment benefits – Many utilities, mortgage companies and rental agencies are offering delayed payment options for people struggling to make ends meet. Contact each agency or service provider to negotiate an agreement. However, these bills eventually will need to be paid. Keep track of these expenses in your budget.
  6. Check credit cards – If you have several credit cards, consider consolidating them. It is much easier to track spending if you use only one credit card. For now, charge only essential or fixed expenses. Also, consider reducing the credit limit to help control money flow.
  7. Develop a final budget – Compare your list of costs to your income. If spending is more than the amount you earn, some costs should be trimmed. Make sure to set aside money each month for emergency expenses, along with the student loan payments you’ll eventually need to make.

Plan for the future

After reorganizing your finances and living on a new budget, make sure to spend only what you can afford. In an uncertain economy, it’s essential to make the right financial moves to avoid accumulating new debts. Make sure to set aside any extra income in an emergency fund for unexpected needs, and if you have questions regarding student loans in this COVID-19 economy, please contact us at youbenefited.com or check out our FAQ.