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How to Handle Student Loans If You’re Unemployed
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As a new graduate, it can take a long time to find a job — and even after you do, there’s no guarantee of job security. If you find yourself unemployed with student loans, it’s normal to be freaked out about how to deal with your debt.
Fortunately, you do have options for managing your student loans while you’re out of work. Here are some ways you can keep your student loan debt in check until you land another job.
Unemployed with student loans? 6 steps you can take
It’s important to keep a clear head when you’re unemployed and juggling student loans. The last thing you want to do is rack up high-interest debt by using a credit card to cover expenses so you can make loan payments on time. Instead, take a look at some other options that could keep you on track without adding to your debt.
You never want to face delinquency or default on your student loans. The student loan delinquency rate is above 25% in some parts of the U.S. — to avoid becoming part of that statistic when you lose your job, get on the phone with your servicer as soon as possible.
If you have federal loans, you can apply for deferment or forbearance, which allow you to pause your repayment. During a deferment, you might not be responsible for the interest that accrues on direct subsidized loans (though you would under forbearance).
Even better, you could chat with your federal loan servicer about other payment options, such as income-driven repayment plans. These plans adjust your monthly payment to a percentage of your discretionary income. You might even end up with a payment of $0, although interest will continue to accrue.
With private student loans, you might not have as many options for managing payments, but it’s still best to talk with your private student loan servicer. As with the government, some lenders have protections for borrowers, and you might even be able to put payments on hold for a few months.
As soon as you’re out of a job, you need to file for unemployment if you’re eligible. That’s a simple way to ensure at least some money is coming in to pay your daily living expenses.
Each state sets its own guidelines for how much money you can collect on unemployment and for how long. In Mississippi, for example, you can get up to $235 a week, while over in Massachusetts you may be able to claim as much as $823. That might not seem like a lot, but it could certainly help keep you afloat.
Visit your state’s employment website to find out the process for applying. Even after qualifying for unemployment, make sure you understand what requirements you need to meet in order to continue receiving benefits.
Even if you were able to get a forbearance or deferment on your student loans, you should try to cover any interest charges. You could pay less than your typical monthly payment, but still ensure your balance doesn’t balloon while you’re out of work.
It might seem easier to avoid making any payments at all when you’re unemployed, but you should consider how much that will ultimately add to your debt load. You can estimate the cost of forbearance or deferment by using a deferment calculator.
As you apply for jobs, or just use the time to reflect, consider taking up a side hustle. Tap into the benefits of the booming sharing economy or pick up part-time work via Uber, TaskRabbit, DoorDash or other apps. There are even freelance gigs you can work from the comfort of your home.
These opportunities can earn you some extra cash while unemployed, while still allowing you to attend job interviews and networking events to secure your next full-time position.
Although you might feel desperate to start working full time again, consider the bigger picture before you accept the first position that comes up. For example, you might be offered a job you don’t really like — in this case, carefully weigh the pros and cons of such a trade-off.
Take the time to research salary rates, so you have the data to get what you deserve when it comes time to negotiate with your future employer.
Remember when your parents told you to have at least three months’ worth of expenses in savings? This is why.
You should always try to have an emergency savings fund — and if you do have one, tiding you over while you’re looking for another job is a perfect reason to use it. Then, once you’re back to work and your student loans are under control, make replenishing that emergency fund a top priority.
Unemployment isn’t the end of the world
You might feel awful about losing your job and worried about the future. But don’t kick yourself over your student loan debt — instead, take advantage of whatever options you have to keep making payments or otherwise avoid falling behind.
Remember: Job loss is temporary, but adding to your debt could further complicate matters down the road. Be proactive about pausing student loan payments to avoid going into delinquency or default.