How to Handle Student Loan Payments When You Lose Your Job

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student loans in unemployment

You have a good career, pay your bills on time, and make your monthly student loan payments. Then the worst happens: You lose your job.

It’s a terrible scenario for anyone, but it’s especially scary when you have a mountain of student loan debt to tackle. Without that income, you might freak out. Don’t worry, though. You have many options to manage those loans while you’re out of work.

Here’s what you can do to keep your student loan debt in check until you find a new job.

How to pay student loans when you’re unemployed

It’s important to think with a clear head when you’re unemployed and dealing with student loans. The last thing you want to do is rack up credit card debt by making loan payments with one. Instead, try some other options that will keep you on track without adding to your debt.

1. Talk to your loan servicer

You never want to face delinquency or default on your student loans. The student loan delinquency rate is 11.2%. To avoid becoming part of that statistic when you lose your job, get on the phone with your servicer ASAP.

If you have federal loans, you can apply for deferment or forbearance. During a deferment, you might not be responsible for the interest that accrues on Direct Subsidized Loans, among other loan types. During a forbearance, however, you’ll be responsible for all interest that accrues, no matter the loan type.

You also could chat with your federal loan servicer about other payment options, such as income-driven repayment plans. These plans adjust your monthly payment to a percentage of your discretionary income. You might not even have to pay anything under one of these plans. However, interest will continue to accrue.

With private student loans, you might not have as many options for managing payments. But it’s still best to talk with your private student loan servicer. As with the government, some lenders have unemployment protections. You might even be able to put payments on hold for a few months.

2. Apply for unemployment

As soon as you’re out of a job, you need to file for unemployment. That’s a simple way to ensure some money is coming in to pay daily living expenses.

Each state sets its own guidelines for how much money you can collect on unemployment and for how long. In Mississippi, for example, you can only get up to $235 a week, whereas in Massachusetts you can claim up to $769. That might not seem like a lot, but it will certainly help keep you afloat.

Visit your state’s employment website to find out the process for applying. Even after qualifying for unemployment, make sure you understand what requirements you need to meet in order to continue receiving benefits.

3. Pay the loan interest

Even if you were able to get a forbearance or deferment on your student loans, you should try to cover any interest charges. You’ll pay less than your typical monthly payment while ensuring your balance doesn’t balloon while you’re out of work.

It might seem easier to avoid making payments, but you have to consider how doing so could affect how long you’re in debt.

4. Start a side hustle

Just because you lost your full-time job doesn’t mean you can’t start a side hustle. In between applying for jobs, tap into the benefits of the booming sharing economy. It doesn’t take much money, if any, to sign up for apps such as Uber, TaskRabbit, DoorDash, and more.

These gigs can earn you some extra cash while affording you the flexibility to go to job interviews and networking events to secure full-time work.

With Uber, drivers make an average $19.04 per hour. So, if you can squeeze in just 20 hours of driving a week, you could make over $1,500 a month. And working half that amount still equates to about $760 a month. Those amounts, of course, don’t take certain factors into account, such as the cost of maintaining your vehicle.

5. Tap into your emergency fund

Remember when your parents told you to have at least three months’ worth of expenses in savings? This is why.

Losing a job is the exact reason why you should always have an emergency savings fund. It should be able to tide you over while you’re looking for another job.

You might have to cut back on extraneous expenses, such as your daily Starbucks or the occasional night out, to build your savings. But even a few thousand dollars sitting in savings can tide you over in an emergency. Those savings could help you avoid taking out more debt in a time of need, too.

Once you’re back to work, replenish your emergency fund.

Unemployment isn’t the end of the world

You might feel awful about losing your job and worried sick about your future. But worrying about your student loan debt won’t make the situation better. Instead, take advantage of all the options you have to keep making payments or at least avoid delinquency.

Remember: Job loss is temporary, whereas adding to your debt can complicate matters down the road.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.