Do I have to pay my student loans if I'm unemployed?

Question

I attended a private university and I have a lot of student debt. I recently lost my job and am worried about not being able to keep up with the monthly payments. Do I have to pay my student loans while I'm unemployed?

Answer

No, probably not. But you'll need to take action. If you have federal student loans and you meet the eligibility criteria, you can get apply for, and hopefully get, a deferment of up to three years. During a deferment, you don't have to make any loan payments.

How Student Loan Deferment Works

A deferment allows you to temporarily postpone making student loan payments for a set amount of time.

When interest doesn't accrue during a deferment. If your loans are subsidized (which includes Federal Perkins loans, Direct Subsidized loans, Subsidized Federal Stafford loans, the subsidized portion of Direct Consolidation Loans, and the subsidized portion of FFEL Consolidation loans), you're not charged interest during the deferment.

When interest will accrue during a deferment. If you have unsubsidized loans, Direct PLUS loans, or FFEL PLUS loans, you'll have to pay the interest that accrues during the deferment period. In most cases, this interest is capitalized—that is, added to the principal balance—though you can pay it during the deferment if you want.

You can find out specifically what type of loans you have at the U.S. Department of Education Federal Student Aid website.

Eligibility Criteria for Deferment

You can get a deferment for up to three years on your federal student loans if you're unemployed or unable to find full-time employment.

How to Get a Deferment

To apply for a deferment of your federal student loans, contact your loan servicer. If you don't know who your loan servicer is, visit the U.S. Department of Education Federal Student Aid website. You can also get a copy of the deferment request form online.

You don't have to pay a fee to apply for a deferment of your federal student loans.

Other Options if You Can't Pay Your Student Loans

If you don't qualify for deferment, you might be eligible for a forbearance for your federal student loans. A forbearance is another way to temporarily postpone loan payments or reduce the monthly payments. Unlike a deferment, interest will continue to be charged on all types of loans.

Another possibility is that you might be able to change your repayment plan to lower the monthly payment.

Keep Making Payments Until You Get the Deferment

You need to keep making the monthly payments on your student loans until you're notified that you're approved for a deferment or another option. If you simply stop making payments on your student loan, you'll face some negative consequences, like a drop in your credit score, among other things. The servicer will probably report your loan as late to the credit reporting agencies once you're more than 90 days late with your payment.