Survival Guide for New College Graduates in the Year of COVID-19

Dear Readers,

I'm hearing from lots of students and recent grads about how uneasy they are about entering the labor force in this difficult economic climate. With unemployment numbers at a record high, it's no surprise that the estimated 4 million new college graduates will have a particularly challenging time this year. But all is not lost, especially for those of you who are determined and smart about your search. Here are a few tips.

I'm not going to sugarcoat it. Looking for a new job is hard, even under the best of circumstances. And it's really hard right now. While you may have a lot of talent to offer, the competition will be extra fierce.

Understand that your most valuable asset is what economists call your "human capital." That is the ability over time to convert all of your skills, energy and talents into work that will generate income and can build financial wealth. In other words, don't just think about your major when considering who might hire you. Think of all the skills and experiences you have to offer an employer.

But realize that no matter how qualified you are, your job search could take weeks or months longer than usual in this environment. Don't have an updated resume? Get busy. Not sure who's hiring? Aggressively follow every lead. If you think commuting or relocating is for someone else, you might want to reconsider. And if you're short on experience, look for internships, unpaid opportunities, or part-time jobs. Some of these positions may be temporary but others may evolve and wind up permanent.

Now isn't the time to adopt a "YOLO" attitude about your finances. Don't have a budget? Start putting one together. Prioritize and decide where you can cut expenses. Cheaper phone plan? Unneeded subscriptions? Put it all on the table.

Make savings a big part of your budget, starting with an emergency fund. Your goal is to eventually build this fund to cover three to six months of essential expenses, but any amount you're able to set aside is a plus. If you find an employer who offers a 401(k) match, take full advantage of it. But make the match the minimum. Save more when and if you can.

Don't try to get away without health insurance. You can stay under a parent's plan until age 26, even if you live in a different location. You can also shop for plan coverage through healthcare.gov if you don't have coverage through a job or a parent.

Use caution with individual or short-term, limited-duration health insurance plans. These plans could be cheaper in the short run but extremely costly over the long run with pre-existing exclusions, limited benefits and large out-of-pocket expenses if you get sick. Don't take any unnecessary chances with your health.

For most federal student loan types, after you graduate or leave school you have a six-month grace period (sometimes nine months for Perkins Loans) before payments are due.

And now, to address financial hardships caused by COVID-19, the U.S. Department of Education will automatically suspend payments on most federal student loans from March 13, 2020 through January 31, 2022. No interest or penalties will accrue on loans during this time. (Normally, for most loans, interest still accrues during any grace period.) After January 31 2022, this payment suspension and interest waiver will end.

Taking advantage of this program won't affect your credit and the loans won't go into delinquency or default. It also means collection agencies shouldn't call or write you during this period.

However, if you'd still like to make payments during this period, you can. This could be a good option if you can afford it because the entire payment will go towards principal, reducing the total amount you pay and helping you pay off the loan faster. (Borrowers who already have an income-driven repayment plan can ask to have their monthly payment recalculated at any time to allow them to make payments and still cover essentials as their income changes.)

Private student loan options vary by lender, so check with your lender.

Some additional good news is that with interest rates dropping, refinancing may make sense. You could save a bundle in interest, but take care to understand what existing benefits and protections you might be trading off.

Whether your loans are federal or private, contact your lender or loan servicer for more eligibility requirements. If you don't know who your loan servicer is for a federal loan, visit studentaid.gov/login or call 1-800-4-FED-AID for assistance.

Federal regulators are encouraging banks and businesses to work with their customers to help them through temporary financial hardships due to COVID-19.

Therefore, if you're having difficulty making any type of payments, contact the lender and ask for help. This includes contacting your bank or landlord regarding your mortgage or rent as well as credit card or auto finance companies. If they don't know you're struggling, they can't help you, so don't hide.

While you are actively seeking a job, your friends and family can be your most important anchors. Reach out to them on a regular basis, and don't hesitate to share your fears or your successes. Sites like LinkedIn can be a great way to expand your professional network. Talking with peers can lead to stronger friendships and camaraderie as well as to new job leads.

My heart goes out to young people who are facing such a challenge at this point in their lives. Take care of yourself physically and emotionally so that you're ready to jump on opportunities. We'll get beyond this crisis, and your future will soon come into clear focus.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.