Being laid off is an extremely difficult experience. Indeed, getting laid off can impact someone on an emotional level, and has a number of financial consequences as well. In addition, losing your job while repaying student loans can can be extremely difficult, since student debt borrowers typically need to repay debt on top of living expenses. However, if you keep a few things in mind, losing your job while repaying student loans can be much more manageable.
Many people have experienced layoffs. Indeed, anyone who worked during the Great Recession likely knows someone who was laid off or was laid off themselves. At the very beginning of my career, when I was just beginning my student debt repayment saga, I myself was laid off from the first job I worked after graduating from law school.
Unfortunately, the first law firm at which I worked experienced a number of financial problems. Since a major matter that my office handled had settled, and there was no replacement work, my firm needed to terminate nearly all of the attorneys and staff who worked in my office. Since everyone knew that the firm was in deep financial trouble, and there had been a round of layoffs before I was eventually terminated, I was able to plan for what I knew was coming.
Losing your job while repaying student loans can be an easier ordeal if you make preparations for being laid off. Since I knew that a layoff was likely, I did not merely pay off my high-interest student loans first like most authorities suggest. Rather, I prepaid each of my student loans so that I did not need to make any payments on my debt for 18 months. In this way, I was able to give myself some financial breathing room during any transition period after being laid off from my job.
In addition, I made sure to save money for living expenses so that I would have cash in reserve even if I lost my job. As previously mentioning on this website, it is advisable that everyone has enough money saved up to live off of for about six months in case they experience a life emergency. I saved even more than this amount, since the job market was weaker when I was laid off than it is today, and I thought it might take me a while to pay off my student loans. If you save enough money for living expenses, losing your job while repaying student loans can be much easier.
Of course, it is important to note that even if you lose your job, this does not necessarily mean that you will receive no money while transitioning between roles. Indeed, in many situations, you may be entitled to unemployment benefits. Depending on the state, unemployment benefits could cover all of your living expenses. In fact, my unemployment benefits covered nearly almost all of my living expenses (but I was not making student loan payments, since I prepaid my student loans).
In addition, many employers provide severance payments to workers they terminate. This helps employees during their career transition, and also ensures that the employers have less liability, since waiving claims against an employer is usually a condition of accepting severance. Some states even allow you to receive severance and unemployment benefits at the same time! Of course, if you have a legitimate claim against an employer, you might want to speak with an attorney about the matter. In any case, severance can also minimize the issues associated with losing your job while repaying student loans.
It should be noted that losing your job while repaying student loans can actually help you pay off your debt. Depending on the industry you work in, you may receive a generous severance package if you are laid off. If you find a job quickly, and do not need to use this severance to pay for living costs, then losing your job while repaying student loans can lead to a substantial windfall.
During my student debt repayment saga, I received a substantial severance package after being laid off. The job market at the time was not that strong, so it took me a few months to find a new job. However, I lived in a state that paid unemployment benefits even if an individual was receiving severance payments from a former employer. By living on a tight budget, I was able to survive off my unemployment benefits alone and save almost the entirety of my severance payments.
Since I was able to find a job relatively quickly, I did not exhaust my unemployment benefits and did not need to tap into my severance payments in order to pay for living expenses. Once I was secure in a new job, I used all of my accumulated severance payments to pay off my student debt. By employing this strategy, I was able to pay off nearly a quarter of my remaining student loans, which made it much easier for me to eventually pay off my student debt.
All told, being laid off is a traumatic experience, and losing your job while repaying student loans is especially challenging. However, through careful planning, you can be more prepared to face any issues if you are laid off while repaying student debt. In addition, under the right circumstances, being laid off can actually make it easier for you to repay student loans.