I just spent an hour on the phone with my student loan provider. Freelancers - listen up.
Most freelancers I know have student loans. I happen to be a freelancer with a LOT of student loans.
Right now, for obvious reasons, a lot of freelancers are extra concerned about their business, and in turn, their cash flow. Maybe you are a freelancer who just lost a ton of gigs or clients, or maybe you are simply caught in an anxiety spiral, bracing yourself for the unknown.
If you have United States Department of Education Student Loans, this article is for you. If you have other types of debt or loans, I would highly encourage you to call the companies with whom you hold accounts and have an open and honest conversation with them as soon as is possible.
But, in terms of student loans issued by the United States government, I called my provider for you with the hopes that the information below will help you address this aspect of your financial life with a little less fear.
If you take three things away from this article, they should be…
If you have any questions, concerns, doubts, or anxieties - call your loan provider. Like, now.
There are likely multiple options available to you that will make your loan payments manageable. You can access them by calling your loan provider.
If you are married, or if your parents cosigned on your loans, it may be a little trickier and the options may be more limited. Still, there are likely options. So - and I know you see this coming - Call. Your. Loan. Provider.
Disclaimer: This article is not by any means financial advice from a financial advisor. I’m so very much not that. It is information that I’m providing in a straightforward, distilled way because most people (including myself) are incredibly undereducated and even misinformed about their student loan options. If you have questions, please consult a financial professional.
So anyways, here’s what you should know:
Repayment Plans
If you are paying back your student loans, you are on a repayment plan - and it’s highly likely that if you’re a freelancer, you’re on a repayment plan that is dictated by your income and recalculated annually. If your predicted income for the foreseeable future has suddenly dropped to zero, or even to a number much lower than before, your repayment plan can be recalculated immediately. Here’s how..
Call your loan provider and tell them what your expected income now is. If it is zero, they will be able to drop the required monthly payment down to zero immediately - no proof of income needed. If your income is now higher than zero, but less than before, they will recalculate your new lower monthly payment and request proof of income. Freelancers - do not fret! You can state, date, and sign your own Statement of Income that will serve as this proof.
Please note that for those who are married, your spouse’s income may be taken into account and this option may not be as beneficial as desired for you. The same applies to people whose parents cosigned for their loans.
Forbearance and Deferment
The long and short of both of these: they serve as pause buttons for your loan repayment. Everyone gets 36 months of each forbearance and deferment.
To qualify for economic hardship deferment - you must meet financial hardship criteria and prove it upon requesting.
To qualify for forbearance - you must simply request forbearance.
The unfortunate parts of both of these:
Interest still accrues during this period and is then added to your loan balance, which then increases the amount of money that will accrue as interest the next time around. This is called capitalization.
As your loan balances increase, your credit score may go down.
Once you use your 36 months, they are done.
So in general, explore income based repayment plans and recalculations first. Then look into forbearance and deferment.
The No Other Options Option
Even if you’re pretty sure the above options don’t apply to you, call your loan provider, calmly and openly explain your current situation, and ask if they have any short term solutions to get through the next few months. They might (many student loan providers have coronavirus financial hardship hotlines) and at least you will know for sure what they are offering that is available to you.
I am not by any means suggesting that everyone renegotiate their student loan repayment plans right now. In fact, if you can manage to maintain your payments, it’s always in your best interest to stay current. However, if you are in triage mode due to a recent and sudden loss of work - or if you want to be prepared should that become your reality - there are options. And I will say it one final time - call your student loan provider to find out what options are available to you.
A special thanks to Christina at Navient for spending her Thursday night talking to me about student loans, the freelance industry, and dating during coronavirus. It was a blast