The day Shelby-lyn Miller was laid off, she signed a nondisclosure agreement and was escorted out of the office. Unfortunately, the $7,000 severance check in her hand wasn’t enough to calm her nerves.
“I was in a panic, freaking out about how I was going to pay student loans, pay for gas, make rent — the list goes on,” said Miller, a digital marketer who was 21 at the time.
About 15% of employees are laid off or discharged from their positions annually, according to the Bureau of Labor Statistics. Just like preparing yourself for a stock market downturn, readying for a change in employment — even a change that seems out of your control — could help you manage your education debt.
Here’s what you need to do to prepare for a layoff generally, and then how you can get your student loans in order too, whether by changing your payment plan or pausing repayment altogether.
How to prepare for a layoff
Miller knew her days were numbered, yet she still put her head down and did her work. In retrospect, she might have benefitted from more preparation.
Look for red flags and assess your risk
Maybe you’re reading this because you’ve noticed warning signs around your own workspace. Perhaps your company’s performance has fallen off in recent quarters. Or you could be feeling the impact more directly, if, for example, the company might have stopped hiring new employees or giving promotions.
Whereas Miller’s layoff was due to a deteriorating relationship with her manager, Alexandra Sheehan, another student loan borrower, was sent home because the digital agency where she worked was running out of money.
“Right before I lost my job, a few clients had dropped, so I knew the company was going to have (to) make staffing changes to be able to afford everyone on the payroll,” said Sheehan, who was a content manager earning a $57,000 salary in 2017. “Given that my boss knew that I was unhappy with the lack of resources, I saw the writing on the wall.”
Just because your employer could be downsizing, of course, doesn’t mean it’ll be you on the chopping block.
According to Nancy Noto, who’s spent years as a human resources executive, the first rounds of layoffs typically affect low-performing employees in redundant positions.
“[It also often involves] employees in non-revenue-generating roles, meaning roles that are not driving sales but instead costing the company money to keep people employed,” Noto said. “Then you might be at risk.”
Put your career first, your company second
If you’re a high-performing employee but still vulnerable, you might try avoiding a potential layoff by applying for a more indispensable position within your company.
“I have definitely seen people moved from one business line to another,” Noto said, “because they were so talented and good at what they do, even though the business unit or product they previously worked on was shutting down.”
Look outside your office doors for other opportunities. For example, you’d be wise to rededicate yourself to networking and updating your resume.
If you’re asked in job interviews why you’re leaving your post, said Noto, there’s no reason to beat around the bush.
“Be honest and let them know that [your] current company is going through some strategic changes that could impact [your] role,” she said, though at the same time, “focus on the new opportunity and why it’s compelling.”
Of course, finding full-time work elsewhere takes time. For Miller, it was nearly three months before she found a job in her field. While searching for opportunities, she bided her time working double shifts in a restaurant.
Sheehan, on the other hand, saw her layoff as a sign she needed to try freelancing full-time. In fact, if you can develop a side hustle before falling victim to layoffs, you could land on your feet even faster.
How to unemployment-proof your student loans
If layoffs are coming down the pike, you should be concerned about how it would affect your finances.
Here’s how to ensure you won’t miss a student loan payment in the face of unemployment, avoiding any risk of delinquency and default.
Make loan repayment a part of your financial plan
If your employer appears to be cutting back on spending, you should look to trim expenses too. Should you suddenly find yourself without an income, you’ll be glad you made a plan. Growing your emergency fund, for example, could pay dividends if you need more than a month to find your next job.
You might also max out your employer benefits while they last. You could take care of any medical check-ups before shifting to out-of-pocket replacement insurance, manage your health savings account funds or increase your 401(k) contribution.
Don’t make any of these money moves, however, without considering how they might affect your student loan repayment. You might actually decrease your retirement investing, for example, if you’re concerned you won’t have enough cash to meet your minimum monthly student loan payment.
Adjust your repayment plan
If being laid off leaves you high and dry, you might have trouble keeping your loans current. Fortunately, however, you do have options.
With federal student loans, you could chose to enroll in income-driven repayment (IDR), which caps your monthly bill at a percentage of your disposable income. Your monthly payment might drop all the way to $0. The downside, however, is that the lower your payment, the more interest will accrue onto your balance.
If you have private loans (and therefore don’t have access to IDR), start by communicating with your lender. If they’re unable to adjust your repayment plan, you might carve out room in your budget to make the minimum monthly payment and no more. That was Sheehan’s strategy.
“When my income slowed down, I reverted back to the minimum payment,” she said. “Luckily, I didn’t hit the point where I needed to reach out and ask for lower monthly payments. If I really got into a bind, I know my parents would’ve helped me.”
Postpone your payments
Delaying monthly payments is more costly because it allows interest to accrue and capitalize onto your loan balance even faster. Still, you might determine that a deferment or forbearance is worth the added cost.
There are many ways to press pause on your federal loan repayment, including in cases of unemployment. In fact, you could suspend payments for up to three years if you’re unable to find work. (You could even receive a deferment retroactively if you’ve already lost your job.)
Forbearance offered by private lenders come with more restrictions — if they’re offered at all. Top-rated online companies like CommonBond offer a respite in cases of economic hardship. Unlike federal loan servicers, however, private lenders rarely provide clear-cut guidelines on qualifying for a postponement, typically making case-by-case determinations.
Refinance with a lender offering protection
If you have private loans but are unsatisfied with your lender’s repayment safeguards, you could refinance with a competing bank, credit union or online lender.
Student loan refinancing offers the potential to reduce your interest rate or monthly payment amount. To qualify, you would need a strong credit score and debt-to-income ratio or a cosigner who has both.
A stable career helps appease lenders too. If you’re worried about your job, however, you could prioritize those lenders that offer unemployment protections.
Just keep in mind that refinancing federal loans would irreversibly remove their government-exclusive protections, including IDR and mandatory forbearance.
Do your best to prepare for the worst
Without her office job, Miller had to figure out how to keep up with her student loan payments. Even though college in her native Canada might have been a little less expensive than at the average U.S. school, education debt is a reality on both sides of the border.
With few financial options available, Miller’s worst-case scenario came to life: She resorted to working at a restaurant chain where tight tops and heels were part of the required uniform.
“The transition was hard,” said Miller, who has since moved up to the role of marketing manager at Wicket, a digital management software firm. “I went from a corporate job to working right around the corner where my ex-bosses, co-workers would often come in with clients, and that was humiliating.”
To avoid her fate, you might instead follow in Sheehan’s footsteps. She had freelancing to fall back on when her pink slip arrived.
“It’s always easier to set yourself up when you’re not in a position of desperation,” she said. “Even if you’re not able to freelance on the side with your profession, there are other ways to generate income.”
By getting out ahead of a potential layoff and making plans for your student loans, you give yourself the best possible chance to recover quickly. If you’ve already been let go, however, check out our guide on recovering from a job loss.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.19% – 6.08%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 2020, 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 6/15/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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.
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 0.2% effective May 10, 2020.