If you recently lost your job and are worried about paying your student loans, you have several options to set your bill to $0.<\/p>\n
Though the national unemployment rate was just 3.8% in August, up slightly from July, layoffs continue to hit workers in industries like tech, media, entertainment, fashion and consulting. Nearly 1,000 tech companies have collectively laid off some 230,000 workers so far in 2023, according to tech industry layoff tracker Layoffs.fyi.<\/p>\n
To make matters even more stressful, federal student loan payments are set to resume in October, after more than three years of an interest-free payment pause that began in March 2020.<\/p>\n
\u201cDon\u2019t feel bad if you have to make tough choices and reprioritize,\u201d says Scott Stark, a senior financial planner at Financial Finesse, a workplace financial wellness company.<\/p>\n
Here\u2019s how you can make your student loans fit into your budget as you get back on your feet.<\/p>\n
Check your budget and spending to see where you can cut back.<\/p>\n
\u201cIt\u2019s crucial to get an accurate sense of your essential expenses and rank them in order of priority,\u201d says Akeiva Ellis, a certified financial planner and CFP Board ambassador. \u201cTake the time to negotiate where it\u2019s possible, and consider areas where you can trim your budget.\u201d<\/p>\n
Student loans often have options for pausing payments that debts like credit cards or auto loans do not.<\/p>\n
\u201cIt\u2019s just about staying afloat until you get that next job,\u201d says John McCafferty, director of financial planning at Edelman Financial Engines, a financial advisory firm.<\/p>\n
Be sure to read:<\/strong> What to do if you get laid off: Take a deep breath, and make these 6 financial moves<\/p>\n After a layoff, reach out to your student loan servicer or lender to learn about what assistance may be available to you, says McCafferty.<\/p>\n Your\u00a0student loan servicer\u00a0can walk you through relief options and their implications, help you update your payment amounts if you\u2019re on an income-driven repayment (IDR) plan and answer other questions you may have.<\/p>\n Here are some specific relief options that could be available to you.<\/p>\n Sign up for an income-driven repayment plan or recertify your income<\/strong><\/p>\n An\u00a0income-driven repayment (IDR) plan\u00a0is the best option for most borrowers who lose their jobs because monthly bills are capped at a certain percentage of your\u00a0discretionary income. If your income disappears, your payments should drop to $0 per month.<\/p>\n You can sign up for an IDR plan at any time, including after a layoff.<\/p>\n Even if you\u2019re already on an IDR plan, you\u2019ll need to submit a new IDR application to update your income post-layoff. The application will ask why you\u2019re submitting it; write that you are submitting early because you want your servicer to recalculate your payment immediately.<\/p>\n You only need to\u00a0recertify your income for an IDR plan\u00a0once a year. If you qualify for $0 payments, that\u2019ll last until your next recertification deadline, even if you get a new job sooner. This can give you some extra breathing room as you catch up on other bills.<\/p>\n A\u00a0new IDR plan called SAVE\u00a0is a good option to explore. The income threshold to qualify for $0 payments is more generous under SAVE than other IDR plans at about $32,800 for a household of one.<\/p>\n And unlike other IDR plans or some unemployment deferments, unpaid interest will not build if you\u2019re on the SAVE plan, which could save you a lot of money in the long run.<\/p>\n The \u2018on-ramp\u2019 is a temporary safety net<\/strong><\/p>\n From Oct. 1, 2023, to Sept. 30, 2024, borrowers who don\u2019t make payments won\u2019t be penalized under a\u00a012-month student loan \u201con-ramp,\u201d\u00a0including no defaults, decreased credit scores or garnished paychecks. However, this is not an extension of the payment pause.<\/p>\n But if you lose your job during the on-ramp, you can skip payments if needed without signing up for a deferment or forbearance. The on-ramp is automatic, so it will kick in even if you simply don\u2019t pay your student loan bill.<\/p>\n The on-ramp isn\u2019t for everyone, Stark says. Interest will still accrue, increasing the amount you may eventually pay back, and payments are still due. Pay your bills if you can, either under an IDR plan or another repayment plan.<\/p>\n Once the on-ramp expires in late 2024, borrowers who lose their source of income may need to consider other options.<\/p>\n <\/p>\n Unemployment deferment<\/strong><\/p>\n Borrowers can pause payments for up to three years with a\u00a0student loan unemployment deferment. This route could be helpful for borrowers who are receiving unemployment benefits or actively job-hunting, says Ellis.<\/p>\n However, depending on the type of federal loan you have, a deferment could increase the amount of interest you\u2019ll eventually pay.<\/p>\n If you have subsidized or Perkins loans and don\u2019t want to sign up for SAVE, an unemployment deferment might be a better option than the on-ramp because subsidized loans don\u2019t accrue interest during a deferment.<\/p>\n However, if you have unsubsidized or parent or grad PLUS loans and don\u2019t want to sign up for SAVE, the on-ramp may be better. Interest will build on these types of loans during deferment, and if you don\u2019t pay the interest as it accrues, it will be capitalized after your deferment period ends, which means it will be added to your loan principal. This could increase the total amount you\u2019ll repay over the life of your loan since you\u2019ll be paying interest on a larger principal sum. But with the on-ramp, interest won\u2019t capitalize.<\/p>\nContact your servicer<\/strong><\/h2>\n
If you have federal student loans<\/strong><\/h2>\n
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