Does Claiming Unemployment Benefits Excuse You From Paying Student Loans?

Unemployment is at all time highs everywhere in the U.S. with recent college graduates that have become unemployed owing student loans. It may be hard, or impossible to continue your loan payments if you fall into that category but it may be possible to get a deferment while you are unemployed.

What is deferment?

A deferment will postpone your loan payments when you are under a financial strain. All student loan lenders have a deferment program. Subsidized student loans will even hold accruing interest while you are in deferment. Tip: if at all possible, at least pay your interest while in deferment.

Am I eligible for a deferment?

There are different deferment options for each type of student loan. Be sure you know what type of loan you need to defer, and what information you need to provide.

  • You can get a deferment if you are attending college at least ½ time.

  • You can get a deferment if you are in a graduate fellowship

  • If you are in a rehabilitation training program, you can get a deferment.

  • An unemployment deferment for no longer than three years

  • If you can prove economic hardship, you qualify for a deferment.

  • If you join the military, you can get a deferment.

  • The Perkins student loan program offers its own deferment options. Law enforcement, corrections officers, and volunteers in the Peace Corps or AmeriCorps.

How do I apply for a deferment?

Student loan deferment forms are available through the Department of Education either directly from their office, or online. If you have any other type of loan, contact the lender for their forms and requirements. Tip: keep paying your loans until your application is approved.

When you contact your lender, simply ask for an economic hardship deferment. They will send the paper work you will need to fill out. Economic hardship deferments are good for up to three years.

There are some updates on income related guidelines, as of July 1, 2009.

A person working full time for less than minimum wage is eligible for deferment under the following conditions:

If you have a family, and your income falls 150% of the poverty level.

If the monthly student loan payments are 20% or more of your income each month. You will be required to prove that you will not exceed 220% of the federal minimum wage or 150% poverty level as stated by your state and family size.

A person not working full time and not earning more than two times the federal minimum wage, or two times 150% of the poverty level for your state and family size. You must also prove that taking the student loan payment out of your income will not leave you with income larger than the federal minimum wage or 150% of poverty level for your state and family size.

Other programs may be available as well. You have to contact your lender as soon as possible to keep them informed as to your status and to learn more about the various programs that might be available to help you.

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