How can I keep student loan payments current during unemployment or a leave of absence?

Being on leave or out of work doesn’t have to mean missed student loan payments and damaged credit. With federal loans there are structured paths—deferment, forbearance, and income-driven repayment (IDR)—and many private lenders offer temporary relief if you ask. Below I explain the options, give a step-by-step checklist you can use today, share common pitfalls I’ve seen in my 15 years advising borrowers, and link to related FinHelp resources.

The basic options and how they affect you

  • Deferment (federal loans): A temporary pause in payments for qualifying borrowers. Interest does not accrue on subsidized federal loans during deferment, but it generally does on unsubsidized and most private loans. See Federal Student Aid for details (source: U.S. Department of Education — studentaid.gov).

  • Forbearance (federal and private loans): A servicer-approved pause or reduction in payments. Interest almost always continues to accrue during forbearance and may be capitalized (added to the loan principal) when the forbearance ends.

  • Income-Driven Repayment (IDR) plans (federal loans): Monthly payments are recalculated based on your discretionary income and family size and can drop substantially while you’re unemployed or earning less. IDR also preserves progress toward forgiveness for qualifying borrowers. (More at studentaid.gov.)

  • Private loan options: Private lenders vary widely. Many will offer temporary forbearance, restructured payments, or hardship programs if you request help promptly. See the FinHelp guide: Options When Private Student Loans Become Unmanageable.

Authoritative references: U.S. Dept. of Education — Deferment & Forbearance: https://studentaid.gov/manage-loans/repayment/deferment-forbearance and IDR plans: https://studentaid.gov/manage-loans/repayment/plans/income-driven. For consumer-focused tips see the Consumer Financial Protection Bureau: https://www.consumerfinance.gov.

Immediate checklist: what to do in the first 7–10 days

  1. Gather loan details: servicer name, loan types, balances, and current due dates. Use your account at https://studentaid.gov if you have federal loans.
  2. Contact your loan servicer before you miss a payment. Ask about unemployment deferment (if available for your loan type), standard forbearance options, and IDR enrollment. Record the date, representative name, and reference number.
  3. Ask how the relief will affect interest, capitalization, credit reporting, and eligibility for forgiveness (for example, Public Service Loan Forgiveness).
  4. Apply for the option the servicer recommends or that fits your plan (IDR applications, deferment forms, or forbearance requests). Save copies of approvals and emails.
  5. Consider making a partial payment (even $25) to show activity and reduce interest accrual.

In my practice I’ve found early contact to be the single most effective step. Borrowers who call before missing payments usually retain more options and avoid collections steps.

How each option affects credit, interest, and forgiveness

  • Credit reporting: Approved deferment or forbearance arranged through your servicer does not create missed-payment notations. However, missing payments without an approved arrangement will be reported and can damage credit.
  • Interest and cost: Forbearance typically increases the long-term cost because interest continues to accrue and may capitalize. Deferment can be cheaper for subsidized loans because federal subsidy pauses interest on those loans.
  • Public Service Loan Forgiveness (PSLF) and other forgiveness programs: Months spent in deferment or forbearance generally do not count toward PSLF. Payments made under qualifying repayment plans (including IDR plans) do count. See Federal Student Aid: https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service.

Choosing the right option for your situation

  • Short gap with strong prospects of re-employment (weeks to a few months): A short forbearance or a temporary payment reduction may be simplest. Be aware of interest accrual.
  • Longer unemployment or low income: Apply for an IDR plan if you have federal loans. IDR can reduce payments to $0 in some cases and preserves qualifying payment months for forgiveness programs when applicable.
  • If you have private loans only: Contact your lender immediately. If their hardship options are limited, compare the cost and eligibility of refinancing versus requesting forbearance once you’re back to work (see FinHelp: Refinancing Student Loans vs Deferment).

Practical scripts and documentation to use when you call

Suggested script: “Hi — my name is [Your Name], account number [XXXX]. I’ve lost income/is on leave and need help keeping my loans in good standing. Which temporary relief options can you provide and how do they affect interest, credit reporting, and forgiveness eligibility?”

Documents to have ready:

  • Recent pay stubs or layoff notice
  • Employer leave-of-absence paperwork or FMLA documentation if applicable
  • Bank statements showing reduced income
  • Your Social Security number and loan account numbers

Always ask for a confirmation email or letter. If they tell you a date when relief begins, write it down and verify it on your online account within a week.

Common mistakes I see (and how to avoid them)

  • Waiting to contact the servicer until after you miss payments. Don’t assume you’ll be able to undo a late payment once it posts. Call first.
  • Assuming forbearance is free. Interest accrues in most forbearances and can increase your balance.
  • Neglecting IDR recertification. If you’re on an IDR plan you must recertify annually. Missing recertification can increase your payment or cause you to exit the plan. See FinHelp’s IDR resources: Income-Driven Repayment Plans.
  • Not documenting agreements. If the servicer approves relief, save the confirmation and check your account to ensure it was applied.

Examples from practice

  • Short forbearance then IDR: I worked with a furloughed client who secured a 3-month forbearance while job hunting, then enrolled in an IDR plan when his income fell. The forbearance avoided missed-payment reporting and the IDR lowered his payment permanently while he rebuilt income.

  • Deferment for parental leave: A new parent in my practice used an approved deferment that applied to their subsidized federal loans, which prevented interest from accruing on those subsidized loans and allowed breathing room during the leave.

Both clients kept files of their servicer confirmations and followed up until changes showed in their accounts.

If you can’t afford any payments: prioritized options

  1. Check eligibility for IDR (federal) — payments may drop to $0.
  2. Apply for forbearance while pursuing employment or income support.
  3. For private loans, negotiate hardship plans and get any agreement in writing.

If you’re seeking forgiveness or rehabilitation

  • If you’re pursuing PSLF, avoid unnecessary forbearance because it usually won’t count toward PSLF. Instead, enroll in IDR and certify employment when required.
  • If your loan is in default, consider rehabilitation programs or consolidation — these have different rules and consequences. See FinHelp: Student Loan Rehabilitation: Steps to Restore Good Standing.

Frequently asked operational questions

  • Will my servicer cancel payments automatically? No — you must apply for relief and confirm it has been posted to your account.
  • Does forbearance stop interest? No — interest typically continues unless a rare relief program specifies otherwise.
  • Will deferment hurt my credit? Approved deferment arranged through the servicer is not a derogatory status and shouldn’t appear as a late payment on your credit report.

Final practical tips

  • Call first, document everything, and follow up in writing.
  • Ask how choices affect long-term cost and forgiveness eligibility before you accept relief.
  • Consider small payments to limit interest growth if you can afford them.
  • If overwhelmed, get help from a certified financial planner or a nonprofit credit counselor. The Consumer Financial Protection Bureau has borrower resources and complaint channels if servicers fail to provide accurate information (consumerfinance.gov).

Professional disclaimer

This article is educational only and does not constitute personalized financial, tax, or legal advice. Rules and program details change; check the U.S. Department of Education (studentaid.gov) and consult a certified financial planner or attorney for decisions specific to your circumstances.

Author: CFP®-certified financial planner, 15+ years advising student loan borrowers.

Authoritative sources: U.S. Dept. of Education (Federal Student Aid) — Deferment & Forbearance and Income-Driven Repayment, Consumer Financial Protection Bureau.