EMPLOYMENT BARRIERS FOR RECENT GRADS
Leaving college without a job offer isn’t uncommon, especially during economic downturns. But the class of 2021 faces unique challenges. The effects of COVID-19 have hit every industry, says Nicole Smith, research professor and chief economist at Georgetown University’s Center on Education and the Workforce. She adds that outside of telecommunications and tech, very few sectors are hiring right now. “If you’re looking for a corona-proof job, it doesn’t exist,” Smith says. Positions with titles that include “entry level” or “new grad” have dropped 68% compared with the same time last year, according to a June 2020 report by Glassdoor. Graduates with little or no experience are competing with millions of unemployed Americans. On top of that, new entrants to the workforce can’t access the safety net of unemployment benefits, even as the prospect of student loan payments looms. TWO OPTIONS FOR FEDERAL STUDENT LOAN BORROWERS Until employers start hiring again, recent graduates have some options to ease their debt burden. The federal payment pause gives them time to breathe since loan bills won’t be due until October 2021, barring a possible extension. To manage payments when they restart, those without jobs can choose an income-driven repayment plan or an unemployment deferment.
An income-driven repayment plan is your best long-term option.
An income-driven repayment plan is your best long-term option. It caps payments at a portion of your income – 10% for example – and extends the repayment term. If you’re unemployed – or underemployed – your payment could be zero. You must contact your student loan servicer to enroll. If you need short-term relief, unemployment deferment allows you to postpone repayment for up to 36 months in six-month increments. It’s less desirable than income-driven repayment because interest builds and is added to the total debt when repayment begins. To qualify for an unemployment deferment, you’ll need to apply with your servicer and prove you’re either receiving unemployment benefits or, in the case of recent graduates, seeking full-time work. Cabrera says she plans to look into income-driven repayment.
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