Crunchbase News is a business magazine that claims there were over 118,000 layoffs in the U.S. technology industry alone in 2023. This is in addition to the two major bank failures and two rate increases by the federal government. This economic turmoil will affect the class of 2023, but they’ll also have to deal with student loan repayments.
Barry Coleman, vice-president of program management at the National Foundation for Credit Counseling, said that this can be a confusing and overwhelming time for students who are about to start repaying their student loans. Coleman mentions that the end of the three-year hiatus on federal student loans, the legal challenges against federal student debt relief program and the impact of inflation on job markets could make new graduates feel anxious.
New graduates don’t have to panic. Here are some tips on how to survive a possible recession and any financial uncertainty it may bring.
Plan your repayments for student loans no matter what the economic climate
According to Betsy Mayotte of The Institute of Student Loan Advisors, understanding your student debt can help you stay on top of it, no matter how the economy performs.
After graduation, you have a grace period of six months before your first payment is due. Mayotte advises that you should gather information about your loans and their holders before this first payment becomes due.
Coleman says that you should also know what your income and expenses are expected to be, as well as how the student loan repayments will fit in your budget. You will avoid any unpleasant surprises when repayment starts.
Pay off your student loans faster if you have a full-time job
You have more freedom if you get a job. If you already contribute to retirement and emergency funds, a steady income allows you to consider putting additional money towards your student loans.
If you can afford to pay more than the minimum amount on your student loan, then this is a great opportunity to eliminate student debt quickly, says Coleman, and save as much as you can on interest.
Don’t forget your employer.
Jim Link, chief of human resources for the Society for Human Resource Management, says that 21 percent of employers include company-paid financial service as part of their benefit package. The programs can include free access to financial advisors or student loan repayment plans. Both of these could provide additional protection during a slow economic climate.
Know your options if you are unemployed
It can be frightening to graduate without a job, especially when the economy is expected to slow down. Even if you have a low income or none at all, there are ways to manage your student loans, even during a recession.
Start by contacting your loan servicer. This is the company who manages your loans. Coleman says to let them know about your unemployment as soon as possible. You can ask what options you have to avoid delinquency, which is not paying your student loans.
Moyette says that federal student loan borrowers have many options when it comes to repayment. With an income-driven plan, you can reduce your payments to zero dollars or temporarily stop them through deferment.
Note that interest will continue to accrue even if you defer your loan. This will increase the total amount of your student loan. Coleman advises that you repay your student loans as soon as you can after you get a job. This will prevent you from having a much larger debt in the future.
If you have federal student loan debt, you may want to consider a career in a government or nonprofit organization while on your job hunt. You may be eligible for Public Service Loan Forgiveness if you work in these positions. Your remaining student loan balance will be forgiven after 10 qualifying years.
Get free help managing your debt
You can still get free student loan assistance from organizations such as The Institute of Student Loan Advisors or the Student Borrower Protection Center, even if your economy is slow.
If you want to know how you can pay off your loans faster or how you can afford monthly payments, Coleman says nonprofit organizations, such as those offered by the National Foundation for Credit Counseling, will connect you to counselors who will help you develop an action plan.
No matter how the economy develops, graduates can create a plan to manage their student loans. This will help them in both tough and prosperous economic times.
This article was originally published in The Associated Press by The NerdWallet.