In 2023 alone, according to Crunchbase News, a business publication, there were over 118,000 layoffs in the US tech sector. There are also two major bank failures and two rate hikes. The Class of 2023 will navigate this economic upheaval while also confronting another variable: student loan payments.
This can be an overwhelming and confusing time for those preparing to start paying off student debt, says Barry Coleman, vice president of program management and education at the National Foundation for Credit Counseling. Coleman cites the expected end of a three-year hiatus in federal student loan payments, legal challenges to federal student debt relief programs, and the potential impact of inflation on the job market as reasons new graduates may feel uncomfortable.
But new grads don’t need to panic. This is how they can weather a potential recession and the financial uncertainty it brings.
Have a plan for your student loans
Understanding your student debt is one of the best strategies for staying on top of your loans, no matter how the economy is evolving, says Betsy Mayotte, founder of the Institute of Student Loan Advisors.
There is usually a six-month grace period after graduation before you are required to make your first student loan payment. Before that first payment is due, gather details like the types of loans you have and who holds them, advises Mayotte.
Then know your expected income, your expenses, and how your student loan payments will fit into your budget, Coleman says. This will limit surprises once the repayment begins.
If you have a job, you pay off student debt faster
When you get a job you are more flexible. A steady income gives you the opportunity to put more money into your student loan debt—if you’re already contributing to your retirement savings and emergency savings.
For borrowers who are able to make more than the minimum payment on their student loans, this is a chance to get rid of student debt as quickly as possible, Coleman notes, while saving as much money as possible on interest.
And don’t forget your employer.
Twenty-one percent of employers offer company-paid financial services as part of their benefits package, explains Jim Link, chief human resources officer of the Society for Human Resource Management. Programs can include free employee access to financial advisors or even student loan repayment programs—both of which could provide additional protection in a weak economy.
If you don’t have a job, know your options for staying current
Graduating without a job offer can be scary, especially when the economy is anticipating a downturn. But with little or no income, there are steps you can take to keep your college debt in check, even during a recession.
Start with your loan servicer, the company that administers your loans. Let them know you’re not employed as early as possible, Coleman says. Ask what options you have to avoid delinquency — which is when a student loan is not paid.
According to Moyette, there are many repayment options for federal student loan borrowers. You can even reduce your payments to zero dollars with an income-based repayment plan or temporarily stop payments with student loan deferrals.
Just be aware that interest may still accrue during the deferral, increasing your total student loan balance. Once you get a job and are able to pay off your student loan, do it as soon as possible so you don’t end up with a lot more debt down the road, Coleman advises.
And while you’re pursuing your job search, it may be worth considering a career with a nonprofit or government agency if you have federal student loans. These positions could qualify you for government loan forgiveness, where your remaining student loan balance is forgiven after 10 years of qualifying payments.
Get free help managing your debt
Even in a weak economy, you can get student loan help from organizations like The Institute of Student Loan Advisors and the Student Borrower Protection Center, which do not charge fees.
Regardless of how you can pay off your loans faster or afford the monthly payments, nonprofits like those through the National Foundation for Credit Counseling can put you in touch with counselors and help you create an action plan, says Coleman.
Regardless of how the economy is shaping up, recent grads can create a strong student loan plan that will serve them well during tough and robust economic times.
Sign up for our weekly newsletter to receive more English language news from the EL PAÍS USA Edition
Comments are closed.