In 2001, I graduated with a bachelor’s degree in English and French Literature — and no job lined up after I walked across the stage. I was unemployed after college for several months, until I found a low-paying job in a bookstore. Not exactly the career I was hoping to start with, but it allowed me to pay my bills, including my student loans.
Five years later, with a fresh new Master of Education degree in my hand, I again found myself with no job prospects post-graduation and student loan payments looming at the end of my grace period. I was lucky enough to land a teaching job a few months later (and a mere two weeks before the beginning of the school year), but it was a stressful time.
Many current college students still struggle with unemployment after graduation. It’s important for grads to remember that unemployment won’t last forever and that there are steps they can take to improve their situation if they can’t find a job after graduation, even if they owe student loans.
Unemployed after college? Reduce your expenses
Money is obviously the biggest stressor of an unemployed student or recent college graduate. There are two ways in dealing with it: Reduce expenses or increase income. There are several tried-and-true methods for lowering your expenses while you are working on ways to increase your income.
1. Live at home
For recent grads, moving back into their childhood bedrooms can feel awkward (or even depressing), but it’s a savvy financial move. Mom and Dad may let you live rent-free or only charge you a minimal rent, and you will be able to save on the cost of food and utilities, among other costs, by living at home.
The important thing to remember is that moving home after graduation is just a place to start. It’s better to be there by choice while you are working to launch your career than to find yourself forced to move back home if you run out of money.
2. Create a budget
It is much easier to stretch your money if you know what your priorities are and where your money is going — which is why it’s so important to create a budget for yourself.
Start by assessing how much money you have (including any income you might be bringing in) and whatever recurring expenses you have. From there, you can determine what costs you can cut in order to live within your means.
Unemployment after graduation can make creating a fairly strict budget a necessity, but it can also be a blessing. Many people get used to the stricter unemployment budget and can continue to live on it once they land their first job. That can give you the opportunity to put your savings — or debt-payoff — in overdrive because you are used to living on less.
3. Research the cheapest cities to live in
The city you choose to live in can largely impact your finances. High price tags on necessities like rent, groceries and gas will leave you with less money to put toward paying off your student loans.
If you’re ready to make a move, carefully research the cost of living before deciding on a new city. Choosing an affordable new hometown can set you up for financial success.
4. Put student loans on hold
College grads generally enjoy a grace period for student loans after graduation, which is often enough time to find a job and get financially settled. Depending on which type of loan you have, you may be eligible for differing grace periods after graduation:
- Stafford loans offer a grace period of six months for borrowers.
- Perkins loans have a standard grace period of nine months for graduates who attended school at least half time.
- PLUS loans do not have grace periods for borrowers. The first payment is generally due right after the final loan disbursement is made.
- Private loans may or may not offer a grace period, although many do. These lenders may refer to the grace period by another term or simply give a date when the first payment is due.
It can be particularly stressful to deal with student loans and unemployment. If you are coming close to the end of your grace period (or your federal loan does not offer one) and you still have not found a job, you may qualify for unemployment deferment.
If you qualify for unemployment deferment, you can postpone your monthly payments for a period up to three years. If your loans are subsidized, then you generally will not accrue interest on your loans during deferment.
If you have unsubsidized loans, interest will accrue during the deferment period. If you’re able, it’s advisable to pay the interest during your deferment period to avoid having it capitalized and added to your principal, though you are not required to do so.
You will have to apply for deferment through your student loan servicer. The process is never automatic. You may also be required to submit documentation to support your request.
Forbearance is an option available to borrowers who are not eligible for deferment. Standard reasons to seek a general forbearance include financial difficulties, medical expenses, changes in employment or another reason deemed acceptable by your loan servicer.
General forbearance is available for direct loans, FFEL program loans and Perkins loans. By going on forbearance, you pause student loan payments for up to 12 months at a time. However, interest will accrue on your loans, whether they are subsidized or unsubsidized. That accrued interest will be capitalized, unless you pay the interest during the forbearance period.
Just like deferment, you must apply for forbearance through your loan servicer, and you may be required to submit supporting documentation.
Increase your income
The other half of surviving the financial stress of unemployment is finding a way to increase your income, even if you have not yet landed a permanent job. If you’re unemployed after college, here are several ideas to keep some money coming in while looking for a job:
1. Broaden your horizons
An easy trap to fall into is keeping your job search narrow. You might assume that you need a job that fits your degree or location preferences, but that job might not exist.
Being open to opportunities can lead to big things, since you never know who you’ll meet or what you’ll learn in a job that might not exactly fit your expectations.
2. Try temping
Temp agencies offer workers short assignments in a variety of different industries. Not only does temping help you pay your bills, but temp positions can sometimes lead to full-time jobs. It’s also a great opportunity to broaden your network and skillset through your temporary assignments.
3. Remember that part-time work is still work
You might pass up on an opportunity because it is only offering part-time hours (and pay). But working part time in your industry can show future employers that you have a strong work ethic and you want to be self-sufficient, even if the job is less than ideal.
Attitude is important for unemployed college graduates
One of the hardest parts of dealing with student loans and unemployment is staying positive. Having a negative outlook can affect your job search, and feeling down about your job situation is something that potential employers can pick up on.
Networking can be a great way to build your professional network, and you’ll feel like you’re going the extra mile to find work, which should keep your spirits up. Use LinkedIn, your college alumni association and professional associations in your industry to make new connections. Seek networking events and attend as many as possible, because you never know who you’ll meet in helping you find a job.
Remember that unemployment will be temporary — even if you can’t see the light at the end of the tunnel from where you are — and that you should continue living your life. Making time for hobbies, spending time with friends or learning something new will help you keep your job search in perspective.
Laura Woods contributed to this report.
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