If you don’t have a job and can’t pay student loans, you can enter into a deferment or forbearance program to temporarily postpone or lower your payments. However, if you default on your loans, it can negatively impact your credit score and the government may garnish your wages or seize your tax refunds.
So let us take a closer look at the inquiry
When faced with the situation of being unable to pay back student loans due to unemployment, it’s important to explore options for deferment or forbearance. These programs can provide temporary relief from payments, allowing borrowers to focus on finding employment. However, it’s important to keep in mind that interest may still accrue during this time, increasing the overall cost of the loan.
If loans go into default, the consequences are much more severe. The borrower’s credit score will take a hit, making it difficult to secure future loans or lines of credit. Additionally, the government may garnish wages or seize tax refunds to collect on the outstanding debt.
As financial author Dave Ramsey puts it, “student loans are not bankruptable.” This means that even if the borrower files for bankruptcy, student loan debt will still need to be repaid. It’s important to take responsibility for student loan debt and make a plan for repayment, even if it means temporarily utilizing deferment or forbearance programs.
Interesting facts about student loan debt:
- The total student loan debt in the United States is over $1.7 trillion as of 2021.
- The average student loan debt per borrower in the class of 2019 was $28,950.
- The student loan default rate in the United States is around 10%.
- Student loan debt is the second largest category of consumer debt in the United States, behind only mortgage debt.
Table:
| Option | Description |
|---|---|
| Deferment | Temporary postponement of payments, but interest may still accrue. Eligibility requirements may vary based on the type of loan. |
| Forbearance | Temporary reduction or suspension of payments, but interest may still accrue. Eligibility requirements may vary based on the type of loan. |
| Default | Failing to make payments for an extended period of time, leading to negative consequences such as damaged credit and wage/tax refund garnishment. |
| Repayment plan | A structured plan for paying back loans over an extended period of time, often with a fixed monthly payment. |
There are also other opinions
If you’re unemployed, you’re still on the hook for your student loan payments unless you request a specific form of relief from your lender. In other words, your student loans don’t automatically go into deferment or forbearance once you become unemployed.
See a video about the subject
The video “What Happens If I Don’t Pay Student Loans” discusses the consequences of not paying student loans. If a loan goes into default after not paying it for 270 days, the lender may take various actions to recover the money owed, such as wage garnishment and legal action. Defaulting on student loans can ruin one’s credit score and make them ineligible for programs like student loan forgiveness, forbearance, deferment, and changing repayment plans. Not paying student loans is not a solution, as the government or lender will always recover their money through wage and tax garnishment. It is recommended to seek out options and resources to come up with a solid financial plan for student loan debt.
More interesting questions on the issue
- Talk to your loan servicer.
- Apply for unemployment.
- Pay the loan interest.
- Start a side hustle.
- Be smart when applying for new jobs.
- Tap into your emergency fund.