Why You May Want To Consider Postponing Payment During Federal Forbearance
Ever since the COVID-19 pandemic has grasped the world, lockdowns and social distancing have become the new norms. Governments around the world are trying their best to control the further spread of the pandemic. Additionally, governments have been providing relief measures to help citizens. President Trump has announced the CARES Act. This relief package allows federal student loan holders to postpone their payments until September 30, 2020, with no interest or additional charges.
Read on to understand why you should consider postponing the payments during this time.
Keep Cash Handy For Emergencies
As per the CARES Act, temporary forbearance has been provided to all federal loan student holders until September 30th. During this period, interest won’t be accrued on the loan and there are no additional penalties for not paying. However, this relief measure doesn’t apply to PLUS loans and private student loans.
Even if the government has allowed you to postpone the payments, you can still make the regular payments if you can afford it. All you’ll need to do is call your lender and get your payment plan re-activated. If your financial status allows it, you can also make extra payments on the loan account. However, with the current situation and the increasing rate of unemployment, experts recommend that you’re better off saving the money for emergency needs.
For most Americans, cash savings are extremely important, especially today. The COVID-19 pandemic hasn’t only affected the health and well-being of people but also has affected the global economy. The increasing unemployment rate has led to lots of financial instabilities.
What happens next is uncertain, hence the best way to avoid taking out high-interest loans for unexpected circumstances is by building savings. Usually, during emergencies, the cost-of-living increases due to the inflated prices of products. If you opt for temporarily postponing your payments, you’ll be able to use the funds to build an emergency fund.
The average student loan repayment is around $393 per month. From March to September, eligible federal student loan borrowers could’ve saved almost $2,751. In these uncertain times, it’s important to keep cash-in-hand until you’re sure you don’t need it.
Consider Other Urgent Expenses
You must also consider the urgent expenses that you’ll have to pay while staying indoors. Since the pandemic has put a halt to global trade, a lot of products are either held in warehouses or haven’t been shipped by the manufactures.
Additionally, a vast amount of people have hoarded huge quantities of essential products, thus leading to an uneven demand-supply ratio. Prices of most products have inflated and the end-users are facing the heat. Unless you already have an emergency fund in place, it’s paramount that you hold on to cash to meet urgent expenses.
The Current Situation Is Unexpected
The outbreak of coronavirus was unforeseen. Even though researchers are trying their best to contain the further spread of this pandemic, there’s still a lot of unknowns. Furthermore, there’s a lot of speculation on how things will proceed once this phase ends.
It’s extremely difficult to predict how things will play out. Death counts are still rising, people are still getting infected, and there’s no remedy yet in place. Holding on to your funds during this unexpected situation will help you stay prepared for the worst.
Bottom Line
If you haven’t yet opted for the forbearance, contact your lender and get it done. Unless you’re in a perfect financial condition with excess funds for handling emergencies, it’s a good idea to save cash for an emergency fund.
