How to Handle Student Loans During a Job Loss

By Jamie Cattanach · June 30, 2021 · 5 minute read

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How to Handle Student Loans During a Job Loss

Getting laid off? Not great. Getting laid off with student loans? Even worse.

When monthly payments can run several hundred dollars or more, paying student loans without an income source can be daunting—if not downright impossible.

Fortunately, there are some options for borrowers to lean on when they lose their jobs or otherwise experience a change in life circumstances.

While many of these revised plans can increase the amount you pay over time, including interest, they can make your student loans more affordable during a temporary period of financial hardship.

How the Coronavirus Affects Student Loans

Covid-19 has led to some pretty major derailments for all of us. Whether you were just starting your career or had a rapidly growing resume (or anywhere in between), there’s a chance your job situation looks different than it did before the pandemic.

Unemployment filings reached a record high at the end of March 2020, meaning a slew of people wondered how to pay their student loans with no job. Educational debt can be difficult to keep up within the best of circumstances, let alone in the midst of a crisis. Fortunately, the government made some moves to offer federal student loan borrowers some solace.

The Trump administration suspended both principal and interest payments on federal student loans through January 2021, and then President Joe Biden extended the forbearance through Aug. 31, 2022. Payments automatically stopped on March 13, 2020, and the suspension doesn’t affect the borrower’s eligibility for student loan forgiveness programs.

The ruling, though, does not affect privately held student loans, like the ones you may have through lenders like Sallie Mae® or a smaller provider.

That said, you may still have options that could help keep your loans from becoming financially overwhelming.

Talking to Your Student Loan Servicer

If your loans haven’t been automatically suspended, you could still reach out to your loan servicer about a modified repayment agreement if you’ve lost your job or are otherwise experiencing trouble with the plan as stated.

Sallie Mae, for instance, has “instituted additional options for customers experiencing financial difficulty” due to COVID-19, and invites borrowers to contact the company through an online chat or phone call to discuss alternatives and assistance.

No matter who your lender is, there’s a good chance it can offer you a temporary solution if you’re unable to make your payments. You may be able to pause your payments, for instance—though you’ll probably still accrue interest during the pause.

Either way, it’s worth reaching out to lenders to update them on your situation and hear what they might be able to offer you in the meantime.

Recommended: COVID-19 Financial Guide

Filing for Unemployment

Unemployment insurance—commonly referred to simply as “unemployment”—is a joint federal-state benefit that offers cash relief to eligible workers who lost jobs through no fault of their own.

Each state has its own requirements and filing processes, which you can learn more about by selecting your state in the drop-down menu here .

Unemployment benefits may offer you enough cash flow to make some payments toward your student loans, especially if you were able to modify your payment plan with your servicer. But if not, there are alternatives to consider.

Options to Consider

Life moves in unexpected ways (see: suddenly living through a pandemic). Student loan servicers know that which is why most of them have some specific alternatives in place for borrowers whose plans change in one way or another.

Here are some that might be helpful in the case of sudden joblessness.


Student loan forbearance allows you to pause your student loan payments or make a smaller payment for a set period of time. It’s available for both federal and private student loans, and it might be an option that feels like a big load off your monthly budget.

That said, in many cases, it’s worth exploring other options before you turn to forbearance. You may still be accruing interest during the forbearance period, which can drive up your total debt quickly.

You also may not be making any progress toward potential student loan forgiveness programs.

Recommended: Examining How Student Loan Deferment Works 


Another option that may be right for you is student loan deferment, which works similarly to forbearance: You won’t be required to make payments for a temporary period, but you’ll still be responsible for the interest that will accrue during that time.

The main difference between forbearance and deferment is that deferments are usually granted in response to a certain life change, such as going back to school at least half-time or actively serving in the military, whereas you can always apply for forbearance (though it may not be granted).

Losing your job is another factor that may make you eligible for student loan unemployment deferment—but again, it’s important to understand that you’ll likely still be responsible for the interest generated during the deferment period, which could mean you pay more for your loan overall.

Certain types of federal student aid may not incur interest during the deferment, such as Direct Subsidized Loans, but you’ll want to double-check with your servicer before you make any decisions.

Recommended: Will Pausing Payments Affect My Credit Score? 

Income-Driven Repayment Plans

If you have federal student loans, you could look into income-driven repayment programs, which allow borrowers to adjust their payments based on what they can afford.

The government offers a variety of income-driven repayment plans, including the Revised Pay As You Earn Plan (REPAYE), the Income-Contingent Plan (ICR), and the Income-Based Repayment Plan (IBR).

Income-driven repayment plans generally reduce your payments to 10% of your discretionary income, which could bring your payments down to $0 if your income is, well, nothing. The plans adjust once you’re making money again in order to ensure that your payments are affordable—but because it might extend your overall repayment period, you could also end up paying significantly more interest in the long run.

Student Loan Forgiveness

A variety of programs allow certain borrowers to have their student loans forgiven, canceled, or discharged if they meet certain requirements.

In many cases, you will be required to have made a certain number of qualifying monthly payments on the loan and meet the terms for the specific forgiveness program you’re considering.

Many student loan forgiveness programs are contingent on the borrower being employed in a specific industry or by a nonprofit organization, which means this option might not help you during unemployment. But it could be something worth keeping in mind over the life of your student loan.

Recommended: Should All Student Loan Debt Be Forgiven?

Paying It Off: New Jobs, Side Hustles, and More

One ideal solution to paying off your student loans … is to make enough money that you can comfortably pay off your student loans. In the long run, that probably means applying for a new job—and maybe even throwing in a side hustle.

Although the coronavirus led to layoffs, furloughs, and hiring freezes in a lot of industries, other areas are actively recruiting. Pharmacies and grocery stores have been overrun, but job seekers might also look into positions with telecommunication services like Zoom or remote tech support jobs.

As far as side hustles are concerned, you might consider turning your quarantine crafting hobby into a saleable asset on Etsy—or consider applying to deliver groceries or premade meals with a service like Instacart.

Once the pandemic finally lifts, the job market may look considerably different in ways we can’t yet predict, as may the job search process.

Either way, once you’re back on your feet, refinancing is one way to reduce the burden of your student loan debt.

It can be difficult to refinance while unemployed; income is one of the qualifying factors many lenders look at when assessing potential borrowers. But once you feel ready, refinancing private student loans, or a combo of private and federal loans, can lower monthly payments, the interest rate, or both—which could make loans more affordable in both the short and long term.

SoFi offers student loan refinancing with an all-online application. There’s no application or origination fee, and borrowers get access to exclusive member benefits that include career coaching and an unemployment protection program*.

Ready to see what your rate could be? Learn more about SoFi’s student loan refinancing today.

Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
*If you become involuntarily unemployed, deferred payments may be applied for a maximum of 12 months, in aggregate, over the life of the loan. Additional terms and conditions apply; see for details.

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