Janice Lozano
Being unemployed is challenging, and having to deal with student loans during this time can be stressful. While you may not be able to stop paying your student loans entirely, there are options to reduce payments or pause them temporarily. The best option for your loans, if you are eligible, is to apply for an income-driven repayment plan. If you're unemployed, your monthly student loan payment could be as low as $0 per month. Other options include forbearance, deferment, and loan modification programs. It's important to get ahead of your student loans, as ignoring them can lead to negative consequences, such as losing future earnings and a poor credit score.
| Characteristics | Values |
|---|---|
| Do unemployed people have to pay student loans? | Yes, unless a specific form of relief is requested from the lender. |
| What happens if unemployed people don't pay their student loans? | Loans become delinquent, go into default, late fees are owed, and credit score suffers. |
| What are the options for people with federal student loans? | Deferment, forbearance, income-driven repayment plans, and loan modification programs. |
| What are the options for people with private student loans? | Forbearance, refinancing, and bankruptcy. |
| What is deferment? | A temporary postponement of loan payments for up to three years, with no interest accumulation for subsidized loans. |
| What is forbearance? | Temporary relief from loan payments or reduced monthly payments, with interest accumulation. |
| What is an income-driven repayment plan? | A plan that ties payments to income and family size, potentially reducing monthly payments to $0. |
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What You'll Learn
Federal vs. private loans
If you're unemployed and wondering what to do about your student loan payments, your options depend on whether you have federal or private loans.
Federal student loans are offered by the government and come with lower interest rates and valuable borrower protections, such as income-driven repayment plans and student loan forgiveness programs. Federal loans always have fixed interest rates, meaning borrowers pay the same rate over the life of the loan. Federal loans also offer standardized benefits, such as deferment and forbearance, which allow borrowers to pause or reduce payments temporarily.
On the other hand, private student loans are offered by banks and credit unions and typically lack the borrower protections that come with federal loans. Private loans may not offer deferment options, and some lenders might charge interest during any temporary postponement of payments. Private lenders set their own options for lowering loan payments, and these options depend on the specific lender and loan product.
Repayment Options
If you're unemployed, your loan repayment options will differ depending on whether you have federal or private loans.
For federal loans, the One Big Beautiful Bill Act (OBBBA) has phased out certain repayment options, such as the graduated repayment plan and several income-driven repayment plans (SAVE, PAYE, and ICR). However, borrowers with federal loans can still take advantage of the income-based repayment plan (IBR) until July 1, 2028, after which they will have to switch to the new income-based Repayment Assistance Program (RAP). Federal loans also offer deferment of up to three years if you're unemployed and unable to find full-time employment. During a deferment, subsidized federal loans (including Federal Perkins loans and Direct Subsidized loans) do not accrue interest.
Private loans do not offer the same standardized benefits as federal loans. While some private lenders might allow postponement of payments, they may charge interest during this time. Private lenders may also offer forbearance, which allows borrowers to stop or reduce payments temporarily, but interest will continue to accrue.
In summary, federal loans generally offer more repayment options and protections for borrowers, especially those who are unemployed, compared to private loans.
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Deferment options
If you are unemployed and unable to make student loan payments, you have several options to consider. The availability of these options depends on the type of loan you have.
If you have federal student loans, you may be eligible for an unemployment deferment of up to 36 months. To qualify for this deferment, you must be receiving unemployment benefits or actively seeking employment. This option will no longer be available for new borrowers after 2027. Additionally, the One Big Beautiful Bill Act (OBBBA), which comes into effect on July 1, 2027, eliminates the possibility of deferment based on economic hardship or unemployment for borrowers who take out federal student loans after that date.
The type of loan you have will determine the length of deferment available. For instance, if you have Federal Family Education Loan Program (FFELP) loans from before July 1, 1993, you may qualify for additional deferments. Perkins borrowers can receive up to 36 months of deferment, with eligibility reviewed annually.
It is important to note that during a deferment period, interest may accrue, particularly if you have unsubsidized loans, Direct PLUS loans, or FFEL PLUS loans. This interest is typically capitalized, meaning it is added to the principal balance. However, you have the option to pay the interest during the deferment period if you prefer.
If you are unsure about your eligibility for a deferment or the specific terms of your loan, it is recommended to contact your loan servicer or visit the U.S. Department of Education Federal Student Aid website to seek further information.
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Forbearance options
If you have federal student loans, you can apply for a forbearance of up to nine months in any 24-month period, according to the One Big Beautiful Bill Act (OBBBA). This Act also eliminated several income-driven repayment plans, including SAVE, PAYE, and ICR. If you were enrolled in one of these plans, you have until July 1, 2028, to switch to a new one, such as the standard repayment plan, the Repayment Assistance Program (RAP), the Income-Based Repayment (IBR) plan, or a graduated or extended repayment plan.
If you have private student loans, forbearance options may vary depending on your lender and loan product. Some private lenders might allow you to temporarily postpone your payments, but they could charge interest during this time.
To find out if you qualify for forbearance, you should contact your loan servicer. If you don't know who your loan servicer is, you can visit the U.S. Department of Education Federal Student Aid website.
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Income-driven repayment plans
If you're unemployed and wondering how to manage your student loan payments, you have several options, depending on whether you have federal or private student loans.
Federal Student Loans
Federal student loans offer standardized benefits. The One Big Beautiful Bill Act (OBBBA), which came into effect on July 4, 2025, has resulted in some changes to the income-driven repayment system. Borrowers who take out federal loans after July 1, 2026, will not have access to any income-driven repayment plans.
Previously, the federal government offered four income-driven repayment (IDR) plans: SAVE, PAYE, ICR, and IBR. However, as a result of the OBBBA, only the Income-Based Repayment (IBR) plan will remain available for existing borrowers after July 1, 2028. The IBR plan bases your monthly payments on your income and household size.
If you are currently enrolled in one of the other IDR plans, you have until July 1, 2028, to switch to a new plan, such as the standard repayment plan, the Repayment Assistance Plan (RAP), or a graduated or extended repayment plan.
Additionally, federal student loans offer the option of deferment or forbearance. Deferment allows you to temporarily postpone making loan payments for up to three years, and during this time, you may not be charged interest if your loans are subsidized. Forbearance is similar, but interest will continue to accrue during the period when you are not making payments.
Private Student Loans
Private student loans may offer deferments, but this is not guaranteed and they may charge interest during this time. Forbearance and alternative repayment plans may also be available, depending on your lender and loan product.
Public Service Loan Forgiveness
It is important to note that payments under every income-driven plan count toward Public Service Loan Forgiveness. This program can forgive your remaining student loan debt after 10 years of eligible public service employment.
In summary, if you are unemployed, there are several options available to manage your student loan payments, depending on the type of loan you have. It is essential to stay on top of your payments to avoid negative consequences such as delinquency, default, late fees, and damage to your credit score.
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Loan consequences
If you are unemployed and unable to make student loan payments, there are several options available to you, including forbearance, deferment, and alternative repayment plans. However, failing to make payments on your student loans can have serious consequences, and it is important to understand these consequences to make informed decisions about your loan repayment.
Delinquency and Default
If you are unable to make your student loan payments, your loans will first become delinquent, which means you are a few days late on your payment. If you continue to miss payments, your loans will eventually go into default. The timing varies depending on the type of loan; most federal student loans go into default after 270 days of non-payment, while private loans typically go into default after 90 days. Defaulting on your loans can have severe financial implications.
Late Fees and Credit Score Impact
In the short term, late payments will result in late fees, which can vary depending on your lender and loan servicer. Additionally, loan servicers report late payments and defaults to credit bureaus, which can significantly damage your credit score. A low credit score can impact your ability to access other forms of credit, such as credit cards or mortgages, and may even affect areas like renting an apartment or securing utility services.
Loss of Future Earnings
Defaulting on your student loans can also result in the loss of future earnings. This can include garnishing your tax refunds, federal benefit payments, and wages to repay your outstanding loan debt. This means that you may lose out on potential income until your loan is paid off.
Interest Accrual
If you choose to pursue options like deferment or forbearance, it is important to understand that interest may continue to accrue during this period. This can increase the total amount you owe over time, making your loan more costly in the long run.
Limited Options for Private Loans
If you have private student loans, your options for relief may be more limited. Private lenders set their own loan terms, and they generally do not offer as many repayment options as federal loans. Private lenders may charge interest during periods of postponed payments, and they often put caps on the amount of forbearance they provide.
In conclusion, while there are options available to manage student loan payments during unemployment, failing to make payments or ignoring your loans can have significant consequences. It is essential to stay informed about your loan terms, explore available options, and take proactive steps to manage your loan repayment to avoid these negative consequences.
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Frequently asked questions
Yes, you still need to make your student loan payments unless you request a specific form of relief from your lender.
There are several consequences, including:
- Your loans become delinquent.
- Your loans go into default.
- You'll owe late fees.
- Your credit score suffers.
You can explore the following options:
- Forbearance: Your loan holder may permit you to stop making payments or make reduced payments. However, interest will accrue during this time.
- Deferment: You can temporarily postpone making payments for a set amount of time. Interest may or may not accrue during this period, depending on the type of loan.
- Income-driven repayment plans: These plans set your monthly payments at a percentage of your discretionary income.
To qualify for unemployment deferment, you must be receiving unemployment benefits or actively seeking full-time work. You need to meet the eligibility requirements and request deferment from your loan servicer.
