COVID-19 Grads: How to Manage Student Loan Payments

Teenage girl wearing graduation gown and cap and protective mask with diploma in car

Graduating from college can be an emotional rollercoaster—you may be excited to finish school, but nervous about entering the working world. For students graduating during the COVID-19 pandemic, this anxiety is more acute than ever.

Students across the country have had job offers rescinded, internships abruptly shortened, graduation ceremonies (and parties) cancelled—and are now entering a pretty dismal job market. New graduates will have to work harder to get their first job and, as the summer wanes, the reality of student loan payments will edge closer.

If you just graduated and are stressed about what to do next—take a deep breath, and read through the following tips for some advice.

How Has COVID-19 Impacted Jobs and Student Loans?

First, it's important to understand exactly how the pandemic has impacted the job market, as trouble finding a job could lead to trouble making loan payments. Since its onset, COVID-19 has caused record unemployment, with more than 20 million people out of work in April, according to the Bureau of Labor Statistics (BLS).

Though unemployment has improved since then, it's unclear how long it will take to get back to pre-pandemic levels, making finding a job in the coming months potentially challenging.

In response to the economic impacts of the pandemic, Congress passed a $2 trillion stimulus package, the Coronavirus Aid, Relief and Economic Security (CARES) Act, which included a provision that temporarily paused student loan interest and automatically suspended payments on federal direct loans and FFELs (Federal Family Education Loans).

These relief measures—which apply only to federal student loans—went into effect on March 13, 2020, and were subsequently extended until September 30, 2021.

If you have federal student loans, your loan servicer should have already suspended your payments and no interest should be accruing on your account. If you have private student loans (those issued by a private lender and not the government), you may have to start paying your loans back sooner—if you're not already doing so.

Know When Your First Student Loan Payment Is Due

If you graduated in the spring or summer of 2020, you may still be within your student loan grace period, during which time you do not have to make payments. For most federal loans (including subsidized and unsubsidized direct loans), grace periods last six months from your graduation date. Private loans may or may not have a grace period, and each lender will have its own policy.

Whether you have federal or private student loans—or both—make sure you know when you have to make your first payment. If you don't know, contact your loan servicer immediately. Some private lenders offer grace periods, and others are even offering extra relief during the pandemic. See our article on how to get student loan relief during the COVID-19 crisis to find out more about which private lenders are offering relief during this time.

Tips for Managing Student Loan Payments During an Economic Downturn

When your grace period ends, or when CARES Act relief expires, you'll need to start making your student loan payments. Missing payments should be your last option as it can cause lasting damage to your credit scores, which will have an impact if you're planning to finance a car, get a credit card or apply for any other type of credit (it can even affect your insurance rates and job prospects).

If you're still looking for a job in your field or are making less than you thought you might be due to the economic downturn, there are actions you can take to help make managing those payments a little easier. Here are a few ways you can work toward your goals, and hopefully conserve as much cash as possible in the process.

1. Keep Searching for the Right Job

If you haven't already secured one, try to remain focused on finding a full-time job in your field. While many industries have slowed or halted hiring, others haven't, and entry-level positions may still be available. Use online job search websites such a Indeed and Glassdoor that aggregate job offers and allow you to create specialized searches. LinkedIn is another great tool that allows you to market yourself, make contacts and find jobs for your skill set.

Try reaching out to your school's career counselor to see if they have any job leads or advice on who in the area is hiring. And keep in touch with your professional and academic networks, as they could recommend you for unique positions you may otherwise not find.

2. Find a Side Hustle—or Two

While you're chipping away at finding a full-time job, get a side hustle (or two) so you can make money in the short term. A side hustle can be anything that helps you bring in extra cash, including part-time jobs and gigs with flexible schedules.

Several types of companies are hiring during the downturn, including grocery stores, hardware stores and food delivery. Even if they're not in your desired field, they can help you pay your student loans while you continue your full-time job search. You can also find jobs you can do from home, such as freelance writing or tutoring high school students.

3. Move Home to Save on Expenses

If you don't have a job and are worried about upcoming loan payments, keep your expenses as low as possible until you increase your income. Moving home could save you money on rent, utilities and even food. Though moving in with your parents after college might not be your first choice, it could help you save some money and give you the flexibility you need to get a job and move out, all while keeping up with your student loan payments.

4. Create a Budget

If you've never made a budget to track your spending, now is a good time to start. Seeing where your money goes every month can help you learn where you might be able to cut back, so you can make sure you have enough to make your loan payments. There are a few ways to create a budget, and they all involve tracking your monthly spending. You can use apps and other tools, such as Experian's personal finances tool, to track your spending every month. Once you know how much you spend in various categories, such as rent, utilities, food and entertainment, consider where you can cut back. Can you eat at home more and get takeout less often? Do you use all the streaming services you're paying for? Can you spend less on clothes? Cutting back where you can will help you save more, and stay on top of loan payments.

5. Ask Your Loan Servicer About Additional Relief Options

Once the CARES Act protections end, your loan servicer may still have relief options of their own you qualify for. If you're unemployed, you can typically put federal student loans in deferment, during which time you won't need to make payments. This deferment will end once you get a job, and if you have an unsubsidized or PLUS loan, interest will still accrue on your balances. You can also look into student loan forbearance, which is another type of payment suspension, though you'll still be responsible for interest payments during the forbearance period.

If you have a private student loan, your relief options may be limited. But that shouldn't stop you from reaching out to your provider to see if they can help in any way.

Don't Forget to Monitor Your Credit

If your student loans are your first-ever debt, it's important to learn about your credit. Since student loans are listed in your credit reports, a record of how you manage your payments will be sent to credit reporting agencies and will impact your credit score. With a good credit score, you'll spend less on interest when you need to take out a loan, and your score could even make a difference when you're being evaluated for a new job or renting an apartment.

If during student loan repayment you think you'll be unable to pay your bill, it's important to do everything you can to avoid paying late. Payment history is the most important factor in your credit score, and missing one student loan payment could have a negative impact on your scores.

You can get a free copy of your credit reports and scores from Experian to see what is in your credit file, and how it's impacting your scores.

Stay Goal-Oriented Moving Forward

If your time after graduation proves challenging try to remain focused on your goals, and make sure to maintain all your responsibilities—like student loan payments—as you work toward your next step.

If you find yourself in a tight spot financially, speak with your creditors to see if they can offer any assistance. Do all that you can during this time to conserve money and stay on top of your finances, and always remember to save for emergencies that may come up in the future.