Should You Pay Off Loans During The Coronavirus?

By Danielle Wirsansky on July 7, 2020

The COVID-19 pandemic has hit the United States especially hard as it ravages the world. With forced shutdowns, life has ground to a screeching halt. The majority of Americans were unable to work from home during the shutdown, and most companies did not have the fund to continue to pay their employees while their business was forced into closure. Many people went without pay or were even laid off, putting millions of Americans into jeopardy.

With many states still experiencing record spikes in new cases, second waves of shutdowns are occurring, or re-openings have been canceled. In places that businesses have re-opened, many people do not feel comfortable going out to work. But most of them do not have the privilege of being able to stay home and out of harm’s way, even if they really need to. According to ValuePenguin, “American households with savings accounts have a median balance of $7,000.” This is only enough for families to get by for a few months if even that long. Since the shutdowns began in March 2020 and it is now July, ay savings Americans had are pretty much drained.

This puts people in an uncomfortable position. What options do they have if they cannot pay their bills? Should they go into debt and destroy their credit to pay their bills? Or should they just not pay their bills and risk still having their credit destroyed and perhaps being evicted or having their utilities turned off? All this for circumstances they cannot control.

Beyond bills is the question of loans. Many people have loans, the interest growing the longer it goes unpaid. Should people be worried about their loans and be trying to pay them off during the pandemic? Can they?

Photo by Alexander Mils from Pexels

Foreshadowing this sequence of events, the CARES Act was initiated. “The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020,” The US Department of Treasury wrote. “This over $2 trillion economic relief package delivers on the Trump Administration’s commitment to protecting the American people from the public health and economic impacts of COVID-19. The CARES Act provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries.”

So how does the CARES Act help you in regards to loans? What protections is the government providing to those with loan debt? There are a number of small ways the CARES Act works to protect you in regards to loans.

Students with school loans are specially protected by the CARES Act. If you have federal student loans, the government is granting you an automatic six-month forbearance where payments do not have to be paid. Having the pressure to come up with the funds to make payments on these loans is off of your shoulders so you are able to pay for necessities like food and shelter. Generally, when you do not make payments on a loan, the interest continues to increase. But with this protection, not only are you sheltered from making payments, no interest will accrue unlike in normal circumstances.

Additionally, if you have auto payments set up to pay off your loans, you can take a deep breath and stop worrying about the fact that an auto-payment might overdraft your account and put you into debt. This is because all auto payments on loans have been suspended. While you are certainly allowed to continue working to pay off your loans independently, you must do so individually and not through the auto-payment feature most banks and institutions offer.

The CARES Act is also protecting vulnerable United States citizens with loans by stipulating that debt collectors must cease collection from loan borrowers until September 30th. This gives many Americans a little bit of breathing room as they try to find new jobs, return to work, and reopen their businesses. Private lending organizations are also trying to help those with loans out by offering relief programs, though you will need to check with your specific institution to see if they are offering any programs and if you are eligible for them.

Photo by Karolina Grabowska from Pexels

In the end, only you know your financial situation well enough to decide whether or not you should be paying off your loans or not in the midst of this pandemic. However, now you know what protections you have should you choose not to and are aware that you do not have too. Knowledge is power, and hopefully, in this case, stress-relieving too. As the pandemic crisis continues, the situation continues to evolve so be sure to research and stay up to date on what the situation is. The longer the coronavirus wreaks havoc, the more likely that the government will have to step up and provide more aid.

Danielle Wirsansky graduated from FSU with a BA in Theatre, a BA in Creative Writing with a minor in History, and an MA in Modern European History with a minor in Public History. While a graduate student, she served as the Communications Officer for the History Graduate Student Association and President/Artistic Director of White Mouse Theatre Productions. She studied abroad in London, England for the Spring 2015 semester at FSU's study center for the Playwriting Program and interned for the English National Theatre of Israel in Summer of 2015. Her first musical, City of Light, opened as part of FSU's New Horizons Festival in Spring of 2016. She has also won the MRCE and URCAA Research grants from FSU. In the past, she served as the Marketing Director for the FSU Student Theatre Association, the intern for the Holocaust Education Resource Council, and the research assistant of Prof. Nathan Stoltzfus. She has previously written for Context Florida (Contributing Writer), USA Today College (Contributing Writer), Sheroes of History (Contributing Blogger), No(le)Reservations (Contributing Blogger), Female, Reloaded (Arts/Entertainment Editor) , I Want a Buzz Magazine (intern), Mandarin Newsline (youth arts update columnist), Distink Designs (Guest blogger), whatscheaper.com (associate editor), escapewizard.com (associate editor), Spark TLH (Contributor), the Tallahassee Democrat (contributor), Elan Literary Magazine (Head of Marketing), and the Improviser Newspaper (Opinions Editor). Danielle has been lucky to be writing for Uloop since 2015 and to have served as the FSU Campus Editor since 2015.

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