Lost your job in the US and worried about student loans? Here’s what you need to know

Amid rising unemployment in the US, student loan borrowers face increasing pressure to manage their monthly repayments. Recent labour data shows a slowdown in job creation, raising concern among recent graduates and laid-off workers about how to handle outstanding education debt in a challenging economic environment.The US economy added just 22,000 jobs in August, falling well short of expectations, according to a Bureau of Labor Statistics report released on September 5. The unemployment rate rose to 4.3%, the highest level in nearly four years, prompting warnings from experts about the financial difficulties borrowers may encounter amid a weakening job market.Federal repayment plans may reduce or pause monthly billsBorrowers with federal student loans who have lost their jobs or are earning less may be eligible for income-driven repayment (IDR) plans.

These plans cap monthly payments at a portion of discretionary income and can reduce payments to as low as $0. Any remaining debt is usually cancelled after 20 or 25 years, providing long-term relief to borrowers facing financial hardship.As reported by CNBC, Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, explained that the US Department of Education may calculate IDR payments based on the borrower’s most recent tax return.

However, if income has recently fallen, "you can provide proof of your current income instead," she said, allowing borrowers to potentially reduce payments faster.Unemployment benefits count as income in the Department’s calculation, but monthly payments under IDR often remain significantly lower than while employed, according to the same report.Deferment options available for unemployed borrowersLaid-off borrowers may also qualify for an Unemployment Deferment, allowing the temporary suspension of federal student loan payments without defaulting.

Eligibility generally requires that the borrower is receiving unemployment benefits or actively seeking full-time employment, among other criteria.Another option is the Economic Hardship Deferment, available to those receiving public assistance or earning below a specified income level. CNBC reported that the number of borrowers enrolled in this programme rose sharply, from 50,000 in the third quarter of 2024 to 100,000 in the third quarter of 2025.

Meanwhile, those in Unemployment Deferment increased from 140,000 to 180,000 over the same period, estimates by higher education expert Mark Kantrowitz showed.Both deferments typically have a three-year lifetime limit. Recent legislation will end access to these options for loans taken out after July 1, 2027, but current borrowers will maintain eligibility, the source confirmed.Interest may accrue during non-payment periodsBorrowers using deferment or forbearance should check whether interest will accrue during the payment pause.

Kantrowitz told CNBC that unpaid interest can increase loan balances once repayments resume, potentially making debts harder to manage in the long run. Making payments that cover at least the interest during this period can help prevent additional debt growth, the report added.Private loan borrowers face fewer optionsThose with private student loans may have fewer relief options compared to federal borrowers. The report advised borrowers to contact lenders directly, explain their job loss, and ask about possible assistance or repayment adjustments. Understanding the specific terms of private loans is important, as relief options and eligibility vary widely between lenders and loan agreements.