5 Things to Consider When You Have Student Loans and No Job

What happens when you graduated months ago, but haven’t found a job and are starting to feel your student loans breathing down your neck? First of all, don’t panic. Start by figuring out exactly what you owe, by when.

Many students loans, including direct subsidized and unsubsidized loans and Federal Stafford loans, have a six-month grace period after graduation, dropping out of school or dropping below half-time status before you need to start making payments. PLUS loans have no grace period. Grace periods on private loans and Federal Perkins loans vary wildly, so it’s important to know what exactly you owe, beginning when.

These grace periods are designed to give you time to get a job after graduation. Don’t worry – you aren’t the only graduate who is reaching the end of the grace period with no employment in sight.

Don’t Ignore Your Student Loans

Before making any other decisions, resolve not to ignore your debt. Simply failing to pay your loans without communicating with your lender is the worst thing you could do. If you go 90 days (three months) without making a minimum payment on your due loans, they become delinquent. Delinquency means the lack of payment will be reported to credit agencies. You will start being charged late fees and you will get hounded by your loan providers. If you go 270 days (about 22 months) without paying on your loans, your will enter default. If you go into default, according to The College Investigator, “your entire balance becomes due and you will no longer be eligible for federal programs like deferment and other repayment plans.

Don’t Wait for Your Dream Job

It can be tempting to feel like you’re “owed” a perfect job offer after spending so much time, money and effort on your education. But if you owe student loans, now isn’t the time to be picky. Begin by finding somewhere – anywhere – that will hire you. If it’s a great company or remotely related to what you want to do long-term, that’s a bonus. Start earning a steady paycheck and while you’re there. Build relationships and develop skills to put you onto the career path you really want.

Learn About IDR Plans

An income-driven repayment (IDR) plan, is a repayment plan based on how much you earn and the size of your family. There are many types of IDR plans, depending on what kind of loans you have and how much money you’re currently making.

For most of them, you will owe a minimum payment of 10 percent to 20 percent of your discretionary income. Once you’ve made the agreed-upon IDR payments for 20 or 25 years, the remaining loan balance will be forgiven. If you don’t currently have a job, especially if you have dependents, an IDR plan might give you a $0 payment. If that seems too good to be true … maybe it is. Long-term, paying nothing now may not be worth it. Because an IDR plan more than doubles the standard repayment length of 10 years, your interest owed over the life of the loan would skyrocket. Before committing to an IDR plan, think about the likelihood your unemployment will be long-term. Honestly consider what your income could be in a few years.

Think About Delaying Payment

Delayed payment options vary based on your loan type and loan provider. Most providers offer some sort of delayed payment plans to people experiencing economic hardship. There are two general types of delayed payment – deferment and forbearance.

According to the College Investor, a deferment of up to 36 months is offered on Federal student loans, and you will not have to pay any interest that accrues during those 36 months. You can also apply for general forbearance on Federal and some private loans, under which you will be required to pay any interest that accrues, but you don’t have to do it in real-time. Forbearance has a lifetime limit of three total years, so don’t choose it if you’re being picky about your employment – save it in case you really need it in the future.

Another way to further delay payment is to continue with your education. Think seriously about this option before you undertake it. In some fields, advanced degrees truly will help your career, but in others, continuing your education indefinitely is just delaying the inevitable.  

Look Into Forgiveness Options

If you are willing to pivot your not-yet-started career path, you could consider a profession that qualifies for student loan forgiveness. Many public service sector careers, including public education, the military and the police force, create eligibility for forgiveness programs. For example, you could have $17,500 of loans forgiven after teaching in a low-income area for five years.

The most important thing to remember when your student loans are coming due but you haven’t found a job is not to panic, and not to ignore your responsibilities. Try a calculator tool to get an idea of payment options based on your specific loans. Then pick up the phone and call your loan providers. You’ll be surprised at how helpful they can be if you’re open and honest about your situation.

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