Congratulations, college grads! You survived all-nighters, dorms, exams, and the agony of choosing a major. And now you finally have that hard-earned degree.
So what’s next? Well, for starters, learning how to pay back student loans while looking for work.
As you prepare to embark on your first foray into the “real world,” chances are the grace period on your student loans (the time before you have to start paying them back) is going to feel way too short.
Here’s how you can make sure you’re ready when that first student loan payment comes due.
How to pay back student loans while looking for a job
While federal student loans and some private student loans offer a grace period, it might not seem like enough of a cushion when you’re looking for a job.
A recent survey by recruiting firm GradStaff found that respondents spent an average of just over three months looking for work.
If it takes you longer than that and your grace period runs out, you have other options for figuring out how to pay back your student loans. But those options will depend on whether your student loans are federal or private.
How to pay back federal student loans if you need a break
1. Income-driven repayment plans
If you have federal student loans and aren’t ready to pay them back yet, it’s time to choose a different repayment plan. What you’ll need is something called an income-driven repayment (IDR) plan.
Income-driven repayment plans are helpful when you’re looking for work. Essentially, they cap your payment amount at a certain percentage of your income.
These plans can keep you in debt longer. That’s because you’ll be paying less per month than you would have on your original repayment plan.
But when you’re struggling financially, they can be a lifesaver. Here are the different IDR plans you can choose from:
- Pay As You Earn Repayment Plan (PAYE)
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
- Income-Sensitive Repayment Plan
For most of these plans, your loans must be Direct Loans or consolidated into a Direct Consolidation Loan to be eligible. Your payment amount depends on the plan but can range anywhere from 10 to 20 percent of your discretionary income.
If you’re interested in more information or want to start an application for an income-driven repayment plan, check out the Federal Student Aid website.
2. Deferment or Forbearance
If IDR plans won’t work for you, then you have two more options: deferment and forbearance.
There are many times you might qualify for deferment, including if you’re an active-duty military service member, if you’re attending an approved graduate program on a fellowship, and more.
Most importantly to you, as you search for your first post-college job, you can apply for deferment if you are unemployed or able to find only part-time employment. For this request, you can defer for up to three years.
As for forbearance, there are two types: general (aka discretionary) and mandatory. General means your servicer can choose whether to grant you forbearance. Mandatory means your servicer must grant you forbearance.
There are various reasons you can claim either type of forbearance, but the ones below are most relevant to you:
- You can request general forbearance if you encounter financial difficulties or experience a change in employment.
- You are eligible for mandatory forbearance if the monthly amount you owe on your loans is equal to or exceeds 20 percent of your total monthly gross income.
Before you jump into either option, you should know the caveats:
- Unless your loans are subsidized, you’ll have to make interest payments during your deferment.
- You’ll always have to make interest payments during a forbearance.
- Like IDR plans, deferment and forbearance can keep you in student loan debt longer than your original repayment plan would have.
You can find your type of deferment or forbearance and apply online via the Federal Student Aid site.
How to pay back private student loans if you need a break
Figuring out how to pay back student loans while you’re looking for work can be tricky if they are private loans. That’s because private student loans don’t come with the same repayment flexibility federal student loans do.
However, that doesn’t mean you’re without options. Your options will depend wholly on your lender. Here are some options many private student loan lenders provide:
- Interest-only repayment options.
Keep in mind that lenders are going to have a different approaches to requirements for whatever hardship programs they offer. The best thing you can do is contact your lender, see what kinds of programs it offers, and find out whether you qualify for any of them.
Whatever you do, don’t default on your loans
As you consider your options, it might seem easier to forget about all of it and let your loans slide for a while.
Don’t do it. Student loan default can hurt you in more ways than one.
Not only will student loan default hurt your credit score, but it will also show up on your credit report. And that could impact your ability to get a job, as potential employers can view your credit report.
“Checking a potential employee’s credit report is used frequently as an additional security measure to help verify an applicant’s identity,” explained Rod Griffin, director of public education for Experian.
Employers can’t see your credit score, and they have to ask permission before obtaining your report. But some jobs require it if you wish to be considered for employment.
Paying for that college degree is worth it in the long run
I remember what it was like looking for a job after college. For the few job openings in my field in my hometown, everyone seemed to want experience. But if employers wanted experience for an entry-level job, how was I supposed to enter the field?
When you go for those first few interviews, remember you have a degree behind you. Sure, it was expensive, and maybe you have moments of regret for taking on student loans to pay for it.
But that degree will also provide you with more job opportunities. Georgetown University did a study last year on this subject and uncovered some interesting facts:
- Of the jobs created after the recession, more than 95 percent went to college-educated job seekers.
- College-educated employees make up 65 percent of the employees in the U.S.
- There were only 80,000 jobs added in the U.S. for people who didn’t attend college – versus 4.6 million jobs for those who did.
Plus, the sooner you find a job, the easier it will be to repay your loans. Focus your efforts on finding a job and keeping your student loans as manageable as possible so you can ramp up your payments when your salary increases.
Your degree may not come with a golden ticket into the workforce. But it does come with more career opportunities. And for that, learning how to pay back student loans is a small price.
Now it’s up to you to decide how to use the opportunity.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|