What should you do about student debt if you lose your job?
Updated on July 23, 2020
If you have lost your job during the pandemic, you’re probably wondering what you should do about your student loan debt. Fortunately, you do have options, and the worst thing that you can do is to do nothing. If your loan goes into default, it could wreck your credit score, make it harder to get credit in the future, and it could even result in the garnishment of wages. Here’s what you should do about student debt if you lose your job:
1. Inform your lender right away
If you are unemployed, you might be eligible for student loan forbearance or deferment. It’s possible to get your student loans deferred for up to three years if you are unemployed or otherwise unable to make payments. However, it’s important to note that loans collect interest when they’re in deferment but not during forbearance.
2. You may be able to get your debt forgiven under some circumstances
While it’s a common misconception that it’s impossible to get student loans forgiven, this is not the case. It is possible to get student loan debt forgiven if you are able to prove that you would be unable to meet your basic expenses and pay your student debt at the same time, which is possible for some graduates who aren’t able to pay their student loan debt.
3. If you are still able to make payments on your student debt, it’s best to do it
If you are able to pay both your expenses and your student loan debt, then it’s best to do it. This will avoid your loan going into default, and you’ll be able to reduce the total amount that you owe.
4. If you’re underemployed, you may have access to the same options that you would have if you were unemployed
If you are working less than full-time, it may be possible to get a deferment or forbearance. This can relieve you of the burden of making payments temporarily.
5. Switch repayment plans
One way to reduce your payments is to switch over to an income-driven or income-based repayment plan. This can considerably reduce the amount that you need to pay each month, which can make student loans far more affordable.