Thinking about joining the great resignation? Whether you’re considering quitting your job to pursue a career with better pay or improved work-life balance, you could be part of a growing trend. The U.S. Bureau of Labor Statistics reported that over 4.4 million people quit their jobs in September 2021—approximately 3% of the total workforce.

But since the majority of college graduates leave school with student loan debt, you may be worried about affording your payments if you quit. Here’s what to do if you’re unemployed with student loans.

How Unemployment Affects Federal vs. Private Student Loans

With both federal and private student loans, unemployment doesn’t change the terms of your loan. Interest will continue to accrue on your balance, and your full payments are still due as originally scheduled.

There are some options you can utilize to reduce or pause your payments, but those options aren’t automatically applied; you have to submit paperwork to your loan servicer for review and approval. Whether you can postpone or reduce your payments is dependent on the type of loans you have and your lender.

Federal Student Loans

If you have federal student loans, you may be eligible for one of the following programs:

  • Income-driven repayment (IDR). Under an IDR plan, your payment term is extended and your payments are set at a percentage of your discretionary income.
  • Alternative payment plans. Some federal loans are eligible for other payment plans, such as extended or graduated repayment. These plans may reduce your monthly payments, but they aren’t based on your income.
  • Deferment or forbearance. If eligible, you can postpone your payments for several months, and most deferments and forbearance periods are renewable.

Private Student Loans

Private loans aren’t eligible for federal IDR plans, deferment or forbearance. But some private lenders have their own financial hardship programs and payment options. For example:

  • College Ave. College Ave offers forbearance to borrowers experiencing financial hardships. If you quit your job and are struggling to afford your payments, you may be able to postpone your payments in three or six-month increments, for a maximum of 12 months over the life of your loan.
  • Laurel Road. Student loan borrowers can qualify for forbearance under certain circumstances. If you’re eligible, you can postpone your payments for up to three months at a time, for a maximum of 12 months.
  • Rhode Island Student Loan Authority (RISLA). RISLA offers private loans nationally, and it offers its own income-based repayment plan. If eligible, RISLA will base your payments on a longer payment term and your discretionary income, potentially reducing how much you have to pay each month.

Policies vary by lender, so contact your lender directly to see if you’re eligible for alternative payment plans or forbearance.

7 Things to Ask About Your Student Loans Before Quitting

Being unemployed with student loans can make a tough situation a lot harder. Before quitting your job, ask yourself these seven questions to ensure you’re prepared for what’s ahead.

1. How Long Can You Afford Your Payments With Savings?

Unless you qualify for forbearance or deferment, your student loan payments will be due as usual. If you plan on quitting, consider how long you can continue making your payments using your current savings. If you don’t have much of an emergency fund, it may not be wise to quit right now.

2. Are You Eligible for Alternative Payment Plans?

Depending on the type of loans you have and your situation, you may be eligible for alternative payment plans, such as federal IDR plans. You can apply or, if you’re already enrolled in an IDR plan, you can recertify your income after leaving your job. Doing so will show that your income dramatically dropped, potentially reducing your monthly loan payments.

3. Is Deferment or Forbearance a Good Idea?

Find out if you can qualify for loan deferment or forbearance. But, make sure you understand how these programs work.

With most student loans, interest will continue to accrue on your balance during the payment postponement. Depending on the details of your account, this could potentially add thousands of dollars to your loans—plus, it’ll likely take you longer to pay off your debt if it’s on hold for a considerable amount of time.

The one exception is if you have federal subsidized student loans that are in a qualifying deferment. In this instance, you would not be responsible for accruing interest. Otherwise, you’re on the hook for all interest charges.

4. Are You Pursuing Loan Forgiveness?

If you have federal loans, you may be eligible for Teacher Loan Forgiveness or Public Service Loan Forgiveness (PSLF). But if you quit your job, you may no longer qualify.

  • Teacher Loan Forgiveness: With Teacher Loan Forgiveness, you only qualify for loan forgiveness if you teach for five full and consecutive years in a low-income school. If you quit before meeting that criteria, you’ll lose credit for the service you did complete.
  • PSLF: Under PSLF, you don’t lose credit for qualifying payments you’ve made in the past. But payments you make while unemployed or working for a for-profit company don’t count towards PSLF, so you’ll lose your eligibility for the program until you find another qualifying position.

5. Do You Have to Repay Education Assistance?

More and more employers are offering tuition reimbursement and student loan assistance programs for their workers. However, be sure to read the fine print before you quit. With some companies, you may be asked to return the money you received if you leave before meeting certain requirements. Depending on how much assistance you received, it may be financially smarter to delay quitting until you meet the service requirements.

6. Did You Take Out a TEACH Grant?

If you took out TEACH grants to pay for school, you’re required to complete a service obligation and teach in a qualifying school for four years within eight years of graduating. Otherwise, the grant is converted into a federal loan and you’ll have to repay the amount with interest.

7. Do You Have Other Sources of Income?

Of course, the simplest way to pay off student loans with no job is to build other sources of income. Whether you have a side hustle delivering groceries, selling handmade items online or providing business consulting services, developing other income streams can ensure you keep up with your student loan payments.

How to Pay Back Student Loans Without a Job

If you have student loan debt, quitting your job can be scary. However, you can handle the challenge by coming up with a plan before handing in your notice. Start now by building up your savings, launching a new side gig and exploring your payment options.