Finding the Silver Lining: COVID, Student Loans and Savings Derek Hurst (Nagano)
How has COVID affected student loan repayment? This is a big one for a lot of people (nonAmericans included), and fortunately there’s a lot of reason to see that as terrible as this pandemic has been, there is a clear silver lining also, especially for recent grads. In fact, it turns out most of us will actually find ourselves in a much better place now than we would have been had Corona not hit, at least in terms of repaying our loans. As Americans are usually the most impacted by student loans, this article will be written from a US perspective. The biggest reason to feel a sweet, tinge of hope today is that interest rates in the United States have been dropped to 0% for the foreseeable future (1). Although slightly terrifying from a macroeconomic perspective, this rate reduction ensures that graduates will not find themselves compounding what for most is an already outrageous loan with increasing interest. The same presidential memorandum established that student loan repayments would be immediately suspended for 60 days, and subsequent CARES act (passed in March 2020) also had provisions for extending the loan suspensions even further 16
(currently expiring September 30th). Forthcoming supplemental legislation and stimulus packages are being discussed in congress as we speak, and although it is not certain when (or even if) these packages will be enacted, it is a safe bet to assume that there will be some provision for extending and possibly enhancing the current loan-repayment measures. However, getting back to the issue of interest rates, many analysts believe that the 0% rates will likely continue through at least the end of the fiscal year, if not further. I hesitate to make my own predictions, but I think we can reasonably expect to see this 0% rate stay in place until at least August 2021, which will mean hundreds, and in some cases, thousands saved for graduates. There’s no telling when things will get back to ‘normal’, but for now, I think we can allow ourselves a well-earned breather. As to how COVID has impacted the rest of your finances, well, it depends on what your current situation is. If you don’t have any savings (by the way, this was me in my first three years in Japan. Protip—don’t be me), then there’s very
