Millions of graduates across the country are struggling to make their student loan payments on time. Unemployed graduates are especially at risk for becoming delinquent on their loans. If you currently lack employment and are concerned about managing your monthly payments, you may be wondering if unemployment deferment can help you manage your loans.
Graduates struggling to repay their student loans should consider working with a student loan debt lawyer. Student loan attorneys can provide essential insight into the complexities of your loan’s terms and advise you on the best repayment plan for your situation. Requesting unemployment deferment for your student loans or applying for an income-driven repayment plan may be your ticket to becoming debt-free.
Can Unemployment Deferment Help Me Manage My Student Loans?
If you are unemployed and struggling to make payments on your student loans, one option is to apply for unemployment deferment. When you defer your loan, you temporarily postpone payments. During deferment, interest doesn’t accrue on subsidized or federal Perkins loans. Any other federal student loans will still accrue interest in deferment. Once you restart payments, the accrued interest will be added to your balance.
In order to receive a deferment on your loans, you’ll need to make a request to your loan servicer, which is usually submitted through a form. Normally, you’ll also need to provide evidence in the form of a letter or pay stub that you meet the eligibility requirements. A deferment on your loans is a viable option for short periods of unemployment. However, it is also good to consider other options, such as an income-driven repayment plan.
What Is an Income-Driven Repayment Plan?
An alternative to unemployment deferment is applying for an income-driven repayment (IDR) plan. In some cases, getting approved for an IDR plan can reduce your monthly payment to $0. Some of the benefits and advantages of IDR plans include:
- They can count toward student loan forgiveness programs. If you are working toward long-term student loan forgiveness, $0 IDR payments qualify for this timeline.
- IDR plans include interest subsidies that waive a portion of accrued interest to a certain threshold, usually up to 50 percent. This will keep your total loan balance from getting out of control, as it might in an unemployment deferment plan.
- IDR plans ensure your payment is proportionate to your income. In these plans, your monthly payments will be either 10, 15, or 20 percent of your discretionary income. IDR plans also have a maximum repayment time frame, meaning after this time has passed, the remaining balance is forgiven. Usually, this timeframe is 20–25 years.
How to Apply for an Income-Driven Repayment Plan
Obtaining an income-driven repayment plan starts with choosing a plan and filling out the corresponding application. Your lender will then take steps to verify your income and other information in your application. They usually do this by checking your tax returns within a two-year period. They may ask you if your income has significantly changed since your last two tax returns. If you are currently unemployed, you would answer yes.
They will also inquire about any taxable income, such as unemployment benefits, wages, dividends from investments, tip money, or alimony. It is important to note that taxable income does not include child support or supplemental security income. If your answer to these questions is no and you are unemployed, your payment will most likely be set as $0 month.
Do Your Best to Avoid Going Into Default
During times of unemployment and uncertainty, do your best to avoid going into default. As outlined above, there are repayment plans that can allow you to make $0 dollar monthly payments. While taking the steps to find these plans and apply can seem overwhelming, it’s much less stressful than rebuilding a bad credit score.
There are few loan situations that aren’t salvageable. Even when you feel overwhelmed, don’t wreck your credit by ignoring your loans. Federal loans don’t disappear—if they go into default, they can hurt your future in the form of wage garnishment. If you are struggling, seek guidance from a student loan attorney.
Contact a Skilled Arizona Student Loan Lawyer
Applying for unemployment deferment or an income-driven repayment plan can feel overwhelming. However, getting on top of your loans is the best way to prevent going into default and damaging your credit score. If you are struggling to figure out the best repayment plan for your situation, you should work with a skilled student loan lawyer.
At McCarthy Law, our attorneys are dedicated to helping students navigate the complexities of the student loan system. Under our student loan debt settlement program, our licensed attorneys negotiate with lenders to ensure our clients pay only a fraction of their original loan balance. To schedule a consultation with one of our skilled student loan settlement attorneys, call (855) 976-5777 or fill out our online contact form.