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Getting laid off? Not great. Getting laid off with student loans? Even worse. Although the payment pause for federal student loans has been extended well into 2023, now is a good time to plan ahead and rethink your payment plan.

Fortunately, there are options for borrowers to lean on when they lose their jobs or experience another change in circumstances.

While many of these repayment plans can increase the amount you pay over time, including interest, they can make your student loans more affordable during a temporary period of financial hardship.

How COVID Affected Student Loans

COVID-19 led to pretty major derailments for some of us. Whether you were just starting your career or had a rapidly growing resume, there’s a good chance your job situation looks different now than before the pandemic.

Unemployment filings reached a record high at the end of March 2020, meaning a slew of people wondered how to pay their student loans with no job. Educational debt can be difficult to keep up with under the best of circumstances, let alone in the midst of a crisis. Fortunately, the government made some moves to offer federal student loan borrowers some solace.

The Trump administration suspended both principal and interest payments on federal student loans through January 2021. President Biden then extended the forbearance several times, most recently until the second half of 2023. Payments automatically stopped on March 13, 2020, and the suspension doesn’t affect the borrower’s eligibility for student loan forgiveness programs.

To be clear, the ruling doesn’t affect privately held student loans, like the ones through lenders like Sallie Mae® or smaller providers. However, private loan holders may still have options that can help keep their loans from becoming financially overwhelming.

Recommended: How Do Student Loans Work? Guide to Student Loans

Talk to Your Student Loan Servicer

If your loans haven’t been automatically suspended, you can still reach out to your student loan servicer about a modified repayment agreement if you’ve lost your job or are otherwise experiencing trouble with your current plan.

Sallie Mae, for instance, has “instituted additional options for customers experiencing financial difficulty” due to COVID-19. The company invites borrowers to contact them via online chat or phone to discuss alternatives and assistance.

No matter who your lender is, there’s a good chance they can offer you a temporary solution if you’re unable to make your payments. You may be able to pause your payments, for instance — though you’ll probably still accrue interest during the pause.

Either way, it’s worth reaching out to lenders to update them on your situation and hear what they might be able to offer.

File for Unemployment

Unemployment insurance — commonly referred to simply as “unemployment” — is a joint federal-state benefit that offers cash relief to eligible workers who lose jobs through no fault of their own.

Each state has its own requirements and filing processes, which you can learn more about by selecting your state in the drop-down menu .

Unemployment benefits may offer you enough cash flow to make some payments toward your student loans, especially if you were able to modify your payment plan with your servicer. But if not, there are alternatives to consider.

Options for Paying Off Student Loans While Unemployed

Life moves in unexpected ways. Student loan servicers know that, which is why most have specific protocols in place for borrowers whose plans change in one way or another.

Here are some that might be helpful in the case of sudden joblessness.

Forbearance

Student loan forbearance allows borrowers to pause student loan payments or make a smaller payment for a set period of time. It’s available for both federal and private student loans, and it can take a big load off your monthly budget.

In many cases, it’s worth exploring other options before turning to forbearance. You may still be accruing interest during the forbearance period, which can drive up your total debt quickly.

You also may not be making any progress toward potential student loan forgiveness programs.

Recommended: Will Pausing Payments Affect My Credit Score?

Deferment

Another option that may be right for you is student loan deferment, which works similarly to forbearance: You won’t be required to make payments for a temporary period, but you’ll still be responsible for the interest that will accrue during that time.

The main difference between forbearance and deferment is that deferments are usually granted in response to a certain life change, such as going back to school at least half-time or actively serving in the military, whereas you can always apply for forbearance (though it may not be granted).

Losing your job is another life change that may make you eligible for student loan unemployment deferment. Again, it’s important to understand that you’ll likely still be responsible for the interest generated during the deferment period, which could mean you pay more for your loan overall.

Certain types of federal student aid may not incur interest during the deferment, such as Direct Subsidized Loans, but you’ll want to double-check with your servicer before you make any decisions.

Income-Driven Repayment Plans

If you have federal student loans, you can look into income-driven repayment programs, which allow borrowers to adjust their payments based on what they can afford.

The government offers a variety of income-driven repayment plans, including the Pay As You Earn Plan (PAYE), the Income-Contingent Plan (ICR), and the Income-Based Repayment Plan (IBR).

Income-driven repayment plans generally reduce your payments to 10% of your discretionary income, which could bring your payments down to $0. The plans adjust once you’re making money again, ensuring that your payments are affordable. But because they might extend your overall repayment period, you can also end up paying significantly more interest in the long run.

In August 2022, President Biden proposed changes to some income-driven repayment programs as part of his forgiveness plan. Payments for undergraduate borrowers would be reduced to 5% of discretionary income instead of the current 10%.

Recommended: REPAYE vs PAYE: What’s the Difference?

Student Loan Forgiveness

A variety of programs allow certain borrowers to have their student loans forgiven, canceled, or discharged if they meet certain requirements.

In many cases, you will be required to have made a certain number of qualifying monthly payments on the loan and meet the terms for the specific forgiveness program you’re considering.

Many student loan forgiveness programs are contingent on the borrower being employed in a specific industry or by a nonprofit organization. That means this option might not help you during unemployment. But it’s worth keeping in mind over the life of your student loan. You might want to bookmark our guide to student loan forgiveness.

Dealing With Late Student Loan Payments

When you’re late making a federal student loan payment, your account quickly becomes past due or “delinquent.” You’ll likely face a late fee, which is usually a percentage of the missed payment.

If you cannot make the payment, it’s important to call your loan servicer right away to make arrangements, such as deferment, forbearance, or a new repayment plan. Otherwise your account will remain delinquent, even if you continue to make subsequent payments on time.

If you are delinquent on your federal student loan for 90 days or more, your lender will report it to the three major national credit bureaus. Your credit score will take a hit, making it more difficult to qualify for good terms on loans and credit cards.

After 270 days, your loan will go into default. Defaulting on your student loan has serious consequences. First, the entire amount you owe on your loan, including interest, becomes due immediately. You won’t be able to take out any other student loans, and you’ll no longer qualify for deferment or forbearance. The government may take your tax refund and federal benefits and garnish your wages to pay off your loan.

Terms and fees for private student loans vary by lender, but the fallout from missed payments is essentially the same.

All you have to do to avoid delinquency and default is talk to your lender or loan servicer as soon as you can. The worst thing you can do is ignore the problem and hope it goes away.

Paying It Off: New Jobs, Side Hustles, and More

Although COVID led to layoffs, furloughs, and hiring freezes, many companies are now actively recruiting again. If you’re back at work but still struggling to make payments, consider ways to bring in some extra money each month.

That’s where the side hustle comes in. Many people have turned their crafting hobby into a small business on Etsy. Others are delivering groceries or pre-made meals with a service like Instacart. Check out our roundup of 9 ways to pay off student loans.

Once you’re back on your feet, refinancing student loans is one way to reduce your debt burden. It can be difficult to refinance while unemployed: Income is one of the factors lenders look at when assessing potential borrowers. But when you’re ready, refinancing private student loans, or a combo of private and federal loans, can lower monthly payments, the interest rate, or both. And that can make loans more affordable in both the short and long term.

It is important to remember that if you refinance your loans with a private lender, you forfeit all of federal benefits, including student loan forgiveness and deferment.

The Takeaway

After a job loss, student loan borrowers have options. Deferment and forbearance allow you to pause payments during times of financial hardship. Just be aware you’ll still be responsible for the interest that accrues during the payment pause. Income-driven repayment plans are another option that can lower your monthly loan bill to as little as $0. Talk to your lender as soon as you foresee a problem paying your bill. That way you can protect your credit score and reduce the stress that comes with loan delinquency or default.

^*If you become involuntarily unemployed, deferred payments may be applied for a maximum of 12 months, in aggregate, over the life of the loan. Additional terms and conditions apply; see SoFi.com/faq-upp for details.
SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

It’s probably a familiar scenario: You think you’ve been careful with your spending, but then a steep credit card bill arrives and throws you into a tailspin. Or you check your bank account balance and realize you’re perilously close to overdrafting.

Wrangling one’s cash flow and meeting financial goals is no easy task…if you’re operating without a budget. But if you do have a budget (a method of tracking and tweaking your money coming in and going out), you can likely sidestep many hassles and hiccups.

While sitting down with receipts, credit card statements, and spreadsheets might not sound like your idea of a good time, it can help you figure out how much you’re spending each month.

And that, in turn, can help you create a realistic budget. Focus on how great it will feel to pay down debt and have a flourishing savings account. Creating a household budget could get you one step closer to achieving your goals.

Here, the 11 steps that will make it happen.

11 Steps on How to Create a Household Budget

If you’re ready to dive in and start setting up a household budget, here are the 11 steps to take. Have a partner? Collaborate on your household budget together so you can be aligned on establishing your financial management.

1. Set Your Goals

To get started, think about your big-picture goals. What are your financial hopes? Do you want to have a healthy emergency fund saved within a year or two? Pay off your student debt early? Stash away enough cash for a down payment on a house within the not too distant future? Or just control your spending so you aren’t living so paycheck-to-paycheck every month?

Write down your top few goals and the issues you need to overcome (i.e., carrying too big a balance on a high-interest credit card). Be as detailed and specific about amounts you want to pay off or save and by when. This can help guide you as you start your household budget.

2. Find the Right Method

The next move in how to create a household budget is to pick a good system. There are many ways to budget, and the right one is the one that works for your personal money style and financial goals. It can be helpful to review some of the options such as:

•   The 50/30/20 budget rule

•   The envelope budgeting method

•   The zero-sum budget

You will also likely find that your financial institution offers tools to help you budget effectively. In addition, there are apps and websites that offer advice and tactics to help you budget, as well as books and podcasts.

Review a few, and pick what looks like the right fit. Or create your own method that uses the best of various techniques.

3. Get the Right Tools

You may also want to select the right gear to help you budget. For some people, this might mean setting up a budget in Excel. For others, it could lead to buying a notebook and colored pens. Or an accordion folder to keep receipts.

These tools can help motivate you to dive in, similar to the way buying back-to-school supplies used to get you psyched up for the start of classes.

4. Calculate Your Income

The next step in creating a household budget is to dig in and account for all the money you have coming in. Tally up how much money you have coming in every month from your job(s), any side hustles, gifts, interest or dividends, and bonuses.

You want to have more money coming in than you have going out every month, so it’s important to know the baseline you have to spend. Look at after-tax dollars to best assess your resources.

5. Identify Your Expenses

Now, you need to see where that money goes as it flows out of your checking account. Going through one month of expenses and dividing everything into categories can help you figure out exactly what your expenses are. You could divide your spending into categories like these:

•   Food

•   Entertainment

•   Education

•   Housing

•   Utilities (Electricity, WiFi, etc.)

•   Transportation

•   Clothing

•   Healthcare and personal care

•   Travel

One important category not to overlook: debt. Make sure to include such expenses as credit card payments, student loans, car payments, and the like.

6. Account for Irregular Expenses

As you consider your spending, don’t forget about those annual or somewhat random expenses that crop up, such as homeowners or renters insurance payments, money for holiday and birthday gifts, and car repairs.

You’ll want to do your best to accommodate those expenses. If you don’t budget for them, you could wind up dipping into savings or adding to any credit card debt you are carrying.

Recommended: 10 Most Common Budgeting Mistakes

7. Determine Your Needs vs Wants

Reviewing your spending is often an eye-opening experience. Do you really spend that much on takeout coffee, streaming stations, or shoes? Did that weekend away with your best friends really total twice what you expected?

Looking at your expenses lays the foundation for separating out your needs in life from your wants.

•   Your needs are things you require to survive: food, shelter, utilities, transportation, covering your student debt, and so forth.

•   Your wants represent spending that reflects “nice to have” items and experiences: concert tickets, another pair of black boots, some flowers to brighten your coffee table.

Think carefully about what in your spending is a need vs. a want. Groceries are needs; dining out on a pricey plate of pasta is a want. A tankful of gas to get to work for a week is a need; an Uber because it’s raining out is a want.

This information will help you determine the proper amount of spending as you create your budget.

8. Allocate Savings

As you look at your goals, your income, and your spending, consider your short-, medium-, and long-term savings goals. Many people believe saving 20% of their income is wise.

As you look at how to set up a household budget, also consider where you want your savings to go. You might be stashing away money for a vacation, a down payment on a home, your child’s college education, your retirement plan, or any combination of aspirations. Once your budget is established, you may want to set up automatic transfers from your checking account to savings accounts to make this process simpler.

9. Do the Math

The next step in setting up a household budget is to enter all the information into your chosen budgeting system (spreadsheet, journal, app). Yes, you need a line for every bucket, from student loans to rent to entertainment to groceries to dining out. Having a line item budget laid out will really acquaint you with where your money is currently going.

Subtract your expenses and savings from your income and see where you land. Do you have money left over? Great. Are you in debt? Not so good.

Seeing how you are tracking is a vital step to knowing how to improve on your current situation with a budget in the next step.

10. Create Your New Plan

Next, take a look at how much is coming in and going out and set some new goals. For each of your spending categories, consider setting a realistic limit for yourself. And keep in mind that cutting back on some expenses might mean you have to increase your budget in other places.

For example, say you currently spend $400 on eating out every month and $400 on groceries, for a total food budget of $800. If you’d prefer to spend closer to $200 eating out each month, you may have to increase your grocery spending.

Do you think you could spend $200 on eating out and increase your grocery spending to $500? If so, your total food budget would come down to $700, saving you $100. Could that go towards paying off some debt sooner?

As you work to create a balanced budget, with specific amounts for each category, you may need to:

•   Eliminate some expenses, like a gym membership, and try out free workouts on YouTube instead.

•   Cut back on spending, such as saving money on streaming services by dropping a channel or two, or getting lattes only on Fridays vs. everyday.

•   Consider how to minimize some costs via negotiation and other tactics. Can you get your credit card issuer to lower your interest rate or get a balance transfer credit card to help you pay down your debt?

•   Determine if you can raise your income. You might ask for a raise or start doing some gig work via a low-cost side hustle.

Your goal is to know how much you can spend every month on your expenses (needs and wants) while ensuring you are saving towards goals and hopefully building wealth as well. Remember: Every budget needs a little fun in it. Knowing you have, say, $20 a week to buy yourself a small treat can go a long way towards keeping you from overspending elsewhere.

11. Modify Your Budget As Needed

Setting up a budget is all about providing guidance and guardrails for managing your money. It helps you keep spending in check and achieve your financial goals.

But it often takes a couple of tries to get right. For instance, with inflation surging, you may find expenses like groceries, gas, and utilities rising. You might have to trim elsewhere to keep your budget humming nicely along. Or life happens: Your sister gets engaged, and you run out and buy her a great gift that requires some budget retooling.

You might find a lower-priced health insurance and be able to sock the savings into your emergency fund and check off a short-term goal. It can be wise to check in with your budget every week or so to see how you’re tracking and make any tweaks needed.

Or you might discover that you’ve made your home budget too intricate and you are avoiding it. If that’s the case, switch to a different system.

At the end of the day, how to set up a household budget is about making your money work for you, so that you can spend it on the things (and people) you love. Make changes as you see fit. Flexibility in a budget is important to its success.

The Takeaway

Tracking your budget regularly could help you see measurable progress as you work toward financial goals. Setting up a household budget can help you better understand your cash flow, manage expenses, lower debt, and meet your saving goals and build wealth.

The right banking partner can help you on your financial journey, too. When you open an online bank account with SoFi, you’ll spend and save in one convenient place and enjoy a suite of tools that can help you budget better. You’ll also earn a competitive APY and pay no account fees, both of which can help your money grow faster.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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