More than 45 million Americans are struggling to handle their student loan debt. Graduates owe a combined total of $1.6 trillion, and the average monthly payment is nearly $400. At the same time, the coronavirus pandemic has cut jobs and slashed incomes, making it much harder to repay.

The weight of the debt is getting to people: A national Student Debt Crisis poll of nearly 59,000 U.S. adults conducted between early December and late November found that a striking 65% are facing increased anxiety, depression, and stress due to loan debt during the coronavirus crisis.

The forbearance period for federal loans originally scheduled to end in December was recently extended through January 31, 2021, to offer a much-needed reprieve. Still, for most borrowers, that won't be anywhere near enough: A full 77% of borrowers don't feel financially secure enough to resume payments until June 2021 or later, Student Debt Crisis found.

People of color, essential workers face more pressure

The economic challenges disproportionately affect essential workers and people of color. About half of Black and Latinx borrowers, 54% and 49%, respectively, said they didn't expect to be able to resume payments for at least six months, compared to 43% of White borrowers. They also are less likely to be aware of changing federal relief policies, the poll shows.

As for essential workers, the situation isn't much better: Roughly 48% of those in health care and 46% of those in education say they can't currently afford their loans despite federal relief.

Video by Stephen Parkhurst

Overall, 52% of borrowers rated their financial wellness as "poor" or "very poor" since the pandemic started in March, and more say they've lost a job or haven't been able to find work. 

Matt Smartt, CFP, a wealth advisor with Henrickson Nauta Wealth Advisors in Belmont, Michigan, says there could be a temporary fix: "If borrowers have lost their income source during the pandemic and have federal student loans, they can apply for income-based repayment plans when the payments do get reinstated."

This plan bases its payment amount on discretionary income, and some plans can drop payments as low as zero. "So, if their income has been reduced, they have the potential for their loan payment to be reduced as well," Smartt says. "This is not the best long-term solution as it ultimately extends the payback term, but it can be a good solution in the short term if income is tight."

Take advantage of payment pauses

Federal relief has helped to an extent, and extra time to pay back could do even more good. While experts typically advise against dragging out forbearance time because of accruing interest, new zero-interest rules on federal loans could mean it makes sense to take a break.

As part of the relief effort, the Department of Education said all borrowers would have their interest rates automatically set to 0% for at least 60 days, starting retroactively on March 13. Thanks to several extensions, that rate is still in effect through at least January 31, 2020.

If their income has been reduced, they have the potential for their loan payment to be reduced as well.
Matt Smartt
CFP

"Normally we don't like forbearances because they accrue interest, and therefore leave students in worse shape than when they started," Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, told Grow in March. "Now, because of the 0% interest rate, it's actually a great option if someone has been financially impacted by the pandemic."   

The bottom line, she says, is that "if you're financially impacted and you can't afford to make the payments and pay your rent or feed yourself, take the forbearance."

If your financial situation is still stable and you can continue payments, however, you might want to consider it. Paying down loans that aren't accumulating interest will lower your principal balance and decrease the total amount that you pay over the entire life of the loan. 

Video by James Armesto

"The stress borrowers feel when the reprieve ends will depend in part on how they handled the extra funds throughout this year," says Kevin Mahoney, CFP, founder of Illumint in Washington, D.C. "Those who shifted those payments to a savings account likely never viewed that money as available to spend. But those who did allow those funds to flow through their monthly budgets may have a harder time adjusting once repayments resume."

Given the current economic situation, using those funds may have been a prudent decision, he adds. It also means, however, that "these borrowers should work on redeveloping the habit of sending that money out the door. Until the repayment freeze ends, they may benefit from automating some or all of this amount to move into their savings account. The sooner they can 'practice' this payment, the less painful and shocking actual loan repayments may feel."

Any major change in income can have an emotional and psychological impact, and a significant setback can feel frustrating and defeating, experts say, but borrowers should view repayment as a marathon, not a sprint, as there will be opportunities in the coming months or years to catch up on your personal repayment plan, particularly once the economy rebounds.

One of the primary objectives, according to Mahoney, should be to stay afloat and try to avoid any long-term harm by taking care of your necessities. "In the future, though, you may have more flexibility and opportunities to get back on the student loan track that you were on."

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