Student Loan Debt And Unemployment | Steps To Take For Your Loans


Important Tips: On the application, make sure to specify that you are submitting the document early so your servicer will recalculate your payment immediately. You should also consider submitting your application using the “alternative method” so that it uses your current income (of being unemployed), versus using your prior year tax return – which will likely have an income and require a payment you may not be able to afford.This option simply extends the time frame you have to pay off your loans, thus lowering payment amounts. Remember that the longer the loan term, the more you pay in interest.To limit how much you spend overall, we suggest either paying more than the minimum payment whenever you can or switching to another plan when you can afford it. You can switch from this plan to another at any time. The same goes for the next plan.This option starts your payments off small and they grow over time — usually every two years. Similar to the Standard repayment plan, you’ll make payments for 10 years. After a few years, you’ll be paying more than you would have on the Standard plan, to make up for smaller payments at the beginning, and you’ll pay much more in interest over the life of the loan.For federal loans, if you’d rather not change your repayment plan, you can choose to delay your payments through forbearance or deferment.You can get an unemployment deferment for up to 36 months, but you must re-certify your unemployment status every six months. This can be helpful if you’re still unemployed at the end of the 6 month period of deferred payments.You also have responsibilities under this deferment. You must be diligently seeking but unable to find full-time employment in any field or at any salary or responsibility level even if you are not eligible for unemployment benefits (or if your eligibility expired). You must also be registered with a public or private employment agency if there is one within 50 miles of your permanent or temporary address.Finally, if you are requesting an extension of your current unemployment deferment, and you are not providing documentation of your eligibility for unemployment benefits, you must certify that you have made at least 6 diligent attempts to find employment on the most recent 6 months.It’s important to note that interest will still accrue while your loans are in deferment, in general. But currently, student loan interest is waived for the duration of the Emergency Declaration.As you can see, this option isn’t as good as changing your repayment plan to an income-driven plan. It provides the same result ($0 payment), but it requires more work, and you have to resume your old payments when the deferment is over.

Finally, you can always request a forbearance. This should be a last resort, and doesn’t make sense for most borrowers. However, it’s the easy way to stop payments immediately. A forbearance can be used if you’ve exhausted your unemployment and financial hardship deferments. Forbearance stops your loan payments, but interest on your loan will still accrue.We don’t recommend forbearance because you’re best served by simply using an income-driven repayment plan. However, you should know the option exists in case your loan servicer recommends it (so you can say no and choose something better).

Private student loans don’t typically offer many options if you’re unemployed. It usually is some variation of a forbearance. Most lenders also put caps on the amount of forbearance they will give to a borrower.And remember, interest still accrues on your loans even if you’re not making payments. So your loan will be much larger after the forbearance is over.Ascent: Ascent student loans offers a Natural Disaster/Declared Emergency forbearance that allows you to postpone payments on your Ascent loans for up to 3 months in the event a natural disaster, local or national emergency, or military mobilization is declared by the appropriate governing agency. Citizens Bank: For borrowers in repayment you can request a hardship forbearance by calling your lender.College Ave: College Ave may offer an extension of the grace period for up to an additional six months following separation from school, and up to 12 months of hardship forbearance over the life of the loan. When needed, forbearance is usually applied in 3- or 6-month increments, before re-evaluating with the borrower to determine on-going need. CommonBond: CommonBond offers up to 24 months of forbearance for student loan borrowers. Discover: Discover offers a discretionary hardship forbearance. Borrowers must call and ask for it.Earnest: Earnest offers borrowers the option to skip one payment every 12 months, with prior approval. Earnest also offers a forbearance option and a rate reduction program. The rate reduction program provides an interest rate reduction for 6-months, which lowers the payment.Wells Fargo: Wells Fargo offers various options if you are having trouble making payments – a loan modification program, which temporarily or permanently lowers payments, short-term payment relief for two months, or a forbearance. Call 1-800-658-3567 for more information.

Being unemployed is challenging enough without having to deal with your student loans as well. But being armed with the information about what’s available can help you make better decisions around unemployment and student loan debt.The worst thing you can do is simply ignore your student loans – there are options for help. You just need to take action.

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