As the coronavirus continues to impact higher education in drastic ways, colleges are tasked with deciding whether to reopen campuses, delay the start of the fall 2020 semester, or offer an online-only curriculum. But schools aren’t the only ones questioning whether a return to the classroom is feasible. Students and families are facing the same dilemma—particularly, those who are struggling financially during the pandemic. A survey by the National College Attainment Network, a nonprofit organization, found that FAFSA submissions for the 2020–2021 school year dropped by nearly 250,000 among lowest-income students. Overall, only 52.1% of the Class of 2020 had submitted a FAFSA as of May 1.
The decrease in FAFSA submissions may be indicative of students choosing to attend more affordable schools closer to home, delaying their education, or not completing their degree programs. If you want to still pursue your education but are unsure about how to fund it, here’s what you should know about your college financing options moving forward.
In response to the national emergency brought on by COVID-19, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was created. The coronavirus relief bill provides temporary higher education relief for existing and future federal student loan borrowers.
About repayment relief
Current federal student loan borrowers have a few options of short-term repayment relief. Until September 30, 2020, Direct Loans, FFEL Loans, and PLUS Loans owned by the Department of Education are automatically deferred and interest charges are paused. Also for this duration, collections on defaulted loans have been suspended. If you’re pursuing federal loan forgiveness or loan rehabilitation, the automatic payment deferment will not adversely affect your progress. Deferred payments through the end of September will count toward your requirement.
Exclusions for Direct Subsidized Loan usage limit
Before the CARES Act, a student’s eligibility to borrow a Direct Subsidized Loan was limited to 150% of the time it takes to complete your academic program. For example, if a school states that a program takes four years to complete, your eligibility to borrow a Direct Subsidized Loan is limited to six years. Currently, if you were unable to complete your semester due to the qualifying emergency, the time you weren’t enrolled won’t count toward your 150% limit.
All-time-low interest rates
Students who are interested in taking out new federal loans for the upcoming academic year can expect record-low interest rates. Due to the current economic climate, loans that are dispersed between July 1, 2020 and June 30, 2021 will incur interest at the rates below.
- Undergraduate Direct Loans (Subsidized and Unsubsidized): 2.75%
- Graduate Direct Loans: 4.3%
- Parent PLUS and Grad PLUS Loans: 5.3%
With interest rates this low, if you rely on federal loans to fund your education, you may see significant savings on the total cost of your loan. These new rates are particularly advantageous if you opt for in-school deferment or have to put your loans in deferment or forbearance. Also, if your or your parents’ income has significantly changed due to the coronavirus, reach out to your school’s financial aid office. They may be able to adjust your financial aid package based on your heightened need.
Private student loans are a financing alternative if you’re no longer eligible for federal student aid. But be aware that since the Department of Education doesn’t have legal authority over private lenders, the relief measures under the CARES Act don’t apply to private loans. Although the coronavirus relief package doesn’t cover private student loans, lenders recognize that this is a difficult situation for everyone. Many have publicly encouraged borrowers to reach out to them directly to discuss emergency disaster forbearance or deferment. Remember, each lender will have different relief options and eligibility requirements, but if you can’t make your private loan payments, reach out to your lender sooner rather than later to ask about your next steps.
Taking out new private student loans
The Federal Reserve is keeping interest rates at near zero as the US economy recovers from the pandemic. Interest rates on student loans may not be at 0%, but private student loan rates are much lower than they were before COVID-19. For example, some lenders are offering variable APRs starting at 1.25% and fixed APRs starting at 3.82%.
Since private student loans require credit checks, you’ll need to have strong credit to qualify for the lowest interest rates. With many students and parents facing financial hardship, dropped credit scores and loss of income may affect a student’s or parent’s ability to get approved for private student loans. If you’re stable financially and have good credit, a private student loan may help you finance the remaining gaps toward your college education.
Scholarship and grants
When it comes to paying for college costs, scholarships and grants are the best routes to take because you don’t have to repay them. In winning more of these awards, you’ll rely less on loans and graduate with less student debt. There are many websites with search resources to help you find reputable scholarships and grants. Also, as a part of the CARES Act, higher education institutions are required to reserve 50% of their relief funds as emergency grants for students who have been affected by coronavirus-related disruptions.
If you’re worried about being able to pay for the next academic school year, it’s critical that you reach out to your college’s financial aid office to learn how they can help and start exploring what your options are now. Reclaiming your education during a pandemic can feel challenging, but know there are many resources available to help you continue toward your degree.