Stressed man

Getting laid off doesn't mean you'll automatically default on your student loans. iStock

When Jesse Lambert lost his job last December, he was about a level seven for panic. After paying rent, the 33-year-old's student loans for his undergraduate degree and masters in international commerce were the next biggest expense at around $450 per month.

Lambert's first step was the one experts advise: He called his lender. After that, his panic quickly subsided. With a game plan in place, the odds were actually in his favor for a short-lived unemployment.

"Having a college degree is a good hedge against unemployment," says student loan expert Mark Kantrowitz, who publishes the education resource site Edvisors Network. The following are steps experts advise taking if you are out of work for a few months while paying off student loans.

1. Call your lender
The default rate for student loans, which total over $1 trillion, was 12.9 percent for public colleges in 2014. In addition to ruining your credit, one reason you do not want to hide from lenders is that they may be able to help.


Federal loans come with set options for deferments, with all payments suspended for a time. There is also the option of forbearance, allowing you to delay payments, although interest will still accrue and be tacked back onto the loan. Deferments are a better choice because they do not add on to the total loan balance, Kantrowitz notes.

Private lenders will also offer these options, and some will go further to come up with alternative payment plans. Wells Fargo, for instance, has a team trained to craft specific solutions for borrowers after listening extensively to their circumstances, says John Rasmussen, Wells Fargo's head of Education Financial Services.

2. Rally your network
When Lambert ramped up his job search last winter, he even got help networking from his lender, SoFi, a start-up that has handled $2.5 billion in loans since launching in 2013. When he refinanced his loans, he remembered seeing something about career services. After calling SoFi about deferment options, he ended up getting personalized job search coaching.

3. Lean on your emergency funds
Because your job search is likely to be short, the best way to get through it is to have an emergency fund, advises Jenny Smith, financial services representative for The Principal Financial Group.

Borrowers in financial trouble should avoid expensive options like consolidation, because it will likely result in an overall higher interest rate, Smith says. Nor should they take on credit card debt in order to pay off student loans. "Band-aiding can be bigger problem later," she says.

If your lender does not offer career services, look to your state government or local chamber of commerce for programs aimed at young professionals.

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