Losing your job can bring up a lot of things. There is an emotional component as you leave behind your old position and team and there is also a logistical one, both in terms of what your next steps will be in your career, and how you will get by for a while without a steady paycheck.
For those with student loan debt, one of the big financial questions after a job loss is how they will continue to make monthly payments. While it may be tempting to table the issue for later, once you have worked through the initial fallout from losing your job, postponing the issue could end up making things more challenging down the road. Here are three steps you can take to manage your loans.
The first thing you should do student loan-wise after losing your job is to get in touch with your loan servicer. The “earlier you contact your loan servicer, the more options you’ll have,” said ELFI, a lender offering private student loans and refinancing. Be transparent about your situation, and find out what relief options are available to you. Your lender can walk you through the choices and help you figure out what might make the most sense.
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Look into alternative repayment plans to reduce payments
Depending on the type of student loans you have and your specific lender, you may have access to different repayment plan options; these could allow you to lower the amount that is due each month. When you are working on a constrained budget after a job loss, this can make a major difference, allowing you to continue making progress on repayment without forking over more than you can reasonably afford
For instance, “federal student loan borrowers who are laid off from their jobs — or just not earning enough — are usually able to sign up for an income-driven repayment plan and get a lower payment, or even a $0 bill,” said CNBC. Those with private loans generally do not have this option, but their lender may instead offer loan restructuring, where you get an “extended loan term that makes your payments more affordable,” said ELFI.
Consider deferment or forbearance for a pause
If continuing to make payments does not seem tenable, you can consider exploring taking a pause entirely, either through deferment or forbearance. For federal loans, “borrowers can pause payments for up to three years with a student loan unemployment deferment,” said NerdWallet. Meanwhile, forbearance is “typically limited to a few months at a time,” said Bankrate. Some private lenders may offer these options, though not all do, and availability varies by lender and loan type. Before proceeding, just make sure to note the implications of a pause, namely whether interest will continue to accrue during it.
