Quick Facts
- Due to economic challenges, layoffs and periods of unemployment are a major worry for many people, particularly student loan borrowers.
- Federal loan borrowers may be eligible for alternative payment plans, student loan deferment, or forbearance.
- Private student loan borrowers may qualify for payment deferrals, loan restructuring, or student loan refinancing to make their loans more affordable.
If you’re on the job market right now, it’s a challenging time. According to research from Challenger, Gray & Christmas, U.S.-based employers announced over 150,000 job cuts in October 2025, the highest number in over 20 years.
If your position is eliminated or your hours slashed and your financial situation worsens, your student loans may be the last thing on your mind. But, if you don’t take action, you risk your loans entering default (and all of the nasty consequences that come with that). Depending on what type of loans you have, there may be several options for managing your student loans while unemployed that can give you some relief.
Handling Federal Student Loans When You’re Unemployed
Whether you recently lost your job due to a layoff or have been unemployed for some time, there are a few steps you can take if you have outstanding federal student loans:
1. Contact Your Loan Servicer Right Away
Reach out to your loan servicer as soon as you get the news about your job; don’t wait for a missed payment. The earlier you contact your loan servicer, the more options you’ll have. If you’re sure who your loan servicer is, reach out to the Federal Student Aid Information Center.
2. Ask About Alternative Payment Plans
With federal student loans, you may be eligible for an alternative payment plan, such as one of the available income-driven repayment plans (IDR plans). These plans base your payment amount on a portion of your discretionary income and family size, so it can drastically reduce your monthly payment amount. If you’re unemployed, your student loan payments could be as little as $5, and your loans will remain current.
You can apply for an IDR plan online.
[Important: Parent PLUS Loans can qualify for IDR plans, but only if you consolidate your Plus loans with a Direct Consolidation Loan first. Afterward, you can apply for the income-contingent repayment plan.]
3. Apply for an Unemployment Deferment
If you lose your job or your hours are reduced to less than 30 hours per week, you may be eligible for an unemployment deferment.
If you have Direct subsidized loans, no interest will accrue during the deferment. But, with other loan types, such as unsubsidized loans or Plus loans, unpaid interest will accrue during the deferment period. However, the Department of Education won’t require you to make any payments.
To qualify, you must be looking for full-time employment, and you must commit to working with a public or private employment agency to help you secure a job.
To apply for an unemployment deferment, fill out the Unemployment Deferment Request form and submit it to your loan servicer. You may need to submit a copy of your unemployment benefit letter or a layoff notice.
[Important: Because of the One Big Beautiful Bill, the unemployment deferment and economic hardship deferment programs will end. New borrowers who take out loans on or after July 1, 2027 won’t be eligible for these programs.]
4. Apply for Forbearance
In some cases, you may be eligible for student loan forbearance rather than a deferment. With a forbearance, you may qualify if you have a reduction in income or if other emergency expenses cause financial hardship. You can qualify for forbearance for up to 12 months at a time.
If you’re eligible for a federal forbearance, interest accrues on all loan types.
To apply, fill out the general forbearance request form on StudentAid.gov and submit it to your loan servicer.
[Important: If you’re pursuing loan forgiveness through a program like Public Service Loan Forgiveness, periods of deferment or forbearance don’t count toward the months of payments required.]
Handling Private Student Loans When You’re Unemployed
Private student loan borrowers aren’t eligible for federal loan programs like unemployment deferment. However, you may be eligible for some relief through a lender-specific program. If you have private loans and lose your job, consider these options:
1. Request a Payment Deferment
Some private lenders, such as ELFI, have financial or economic hardship programs. Eligibility requirements vary by lender.
Through ELFI, you may qualify for a student loan deferment or forbearance for up to 12 months, allowing you to skip your payments for a limited time while you search for another job.
Student loan borrowers should contact their lender’s customer service department to find out if a payment deferment or forbearance option is available.
2. Ask About a Loan Restructuring
If you cannot afford your payments, some lenders have a loan restructuring option. With this approach, you may be eligible for an extended loan term that makes your payments more affordable. Payments continue to be due, but they’ll be a smaller amount.
3. Consider Student Loan Refinancing
Another option is student loan refinancing. If you have a cosigner with a reliable source of income and a good credit score, you could qualify for a new loan with a better interest rate or different repayment term. With refinancing, you could significantly lower your monthly student loan payments, making it easier to stay on track of your debt.
Through ELFI, you can view your loan options without affecting your credit score, and you can choose a loan term as long as 15 years.
Job Searching with Student Loan Debt
If you’ve lost your job, financial stress can be severe, and student loans can make the situation feel even worse. But, it’s important to take several actions to prevent things from getting worse:
- Be aggressive in your job search: While losing your job can be a shock, it’s important to aggressively begin your job search as soon as you can, since the application and interview process can take several weeks or even months. Update your resume, write customized cover letters, and reach out to folks in your professional and social network to get help finding a new role.
- Proactively contact your loan servicer: Reach out to your loan servicer as soon as you get the news about your job to discuss your repayment options and next steps.
- Pick up a side hustle: Job searching can take a while, so picking up a side gig or part-time job in the meantime can be a great way to keep your skills sharp and income coming in. SideHustleNation is a great resource for finding potential side gigs.
Take care of yourself! This is a tough time, but with some extra work and outreach, you can get through this and move on to the next stage of your career.
