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If You Get Laid Off, Here’s What You Can Do About Your Student Loan Payments

Work was going great. Until it wasn’t.

You’ve been given today’s version of the ‘pink slip’ – a message delivered either in person or digitally that you’re being let go, laid off, terminated. And one of the first things that looms large in your mind:  student loan debt.

But take a breath and take a minute to read on. All federal student loans and some private student loans have protections that could help ease your financial worries whether you’re in-between jobs, out of a job, or dealing with an illness or disability that’s impacting your earnings.

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One of the first calls you should make after losing your job is to your loan provider. Explain your financial situation to them and discuss options for getting a break on making payments until your financial situation improves. Finding a new job can take some time, so any help you can get in terms of managing your loan obligations is a bonus.

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Deferment and forbearance options are applicable to all federal loans as well as some private loans. If your student loan is in deferment or forbearance, you won’t be required to make any payments.

With student loan deferment, you won’t be charged interest on your federal subsidized loans while they’re in deferment; you will, however, be charged interest on unsubsidized federal loans and private student loans. With forbearance, you may be allowed to stop making loan payments or reduce your monthly payment for up to 12 months, but interest on the loan or loans will continue to accrue. A private loan will always continue to rack up interest charges.

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It may feel like it initially, but you’re not alone when it comes to losing a job. For most people, steady, long-term employment is dependent upon many factors, such as the economy, which you can’t control. It’s important to reach out if you’ve lost a job to individuals and services that can help you navigate the job market and your financial obligations.

Because unsubsidized loans and private student loans will continue to accumulate interest while the loans are in deferment or forbearance, consider making interest payments if you’re financially able to do so.

If you can only pay part of the accumulated interest, apply your payments to the highest-interest loans. In general, loans offered by the Department of Education will have lower interest rates than those offered by private entities. By continuing to pay loan interest, your student loans won’t be worth more than before you lost your job, and you’ll be in a better position to resume manageable payments when you begin working again.