Student Loans for Unemployed Students: Eligibility Requirements and Options

Pursuing a college degree is an exciting endeavor, but figuring out the best way to pay for school can be confusing for all types of students. Many students finance their education through student loans, but what happens if you're unemployed? This article explores the eligibility requirements for student loans for unemployed students and the various options available to help finance their education.

Eligibility for Federal Student Loans Without a Job

Yes, you can still get student loans even if you don’t have any income. Federal student loans do not require a job, credit score, or income to qualify. Students often go directly from high school to higher education, and those who are just starting school haven’t had time to build work history. For those starting college later in life, you may be considering quitting your job to attend school. Federal student loans don’t require you to have a job or income. In fact, many students borrow money for college before they ever get their first paycheck.

Key Requirements for Federal Loans

To be eligible for federal student loans, you generally need to be:

A U.S. citizen or permanent resident.
Enrolled at least half-time in a qualified program at a participating school, which typically means completing at least 6 credit hours in a semester.
Not in default on a prior federal student loan.

The results of your FAFSA application will determine which types of loans you are eligible for and how much aid you can receive. Total aid, including student loans, cannot exceed the school’s total cost of attendance (tuition and fees, room and board, transportation, personal and miscellaneous expenses).

Types of Federal Loans for Students with No Income

Federal loans for students with no income include:

Direct Subsidized Loans (Stafford Loan): Available only to undergraduate students on the basis of financial need. The federal government covers the interest on these loans while borrowers are enrolled at least half-time and for six months after they are no longer enrolled at least half-time. No credit check required.
Direct Unsubsidized Loans (Stafford Loan): Available to undergraduate and graduate students regardless of financial need. Interest is charged throughout the life of the loan. No credit check required.
Federal Pell Grants: Typically, these are grants (free money) provided to students with exceptional financial need and do not need to be repaid.

For federal loans, your income can include your parents’ or legal guardians’ income if you’re considered a dependent. Income is verified through your FAFSA using tax returns from previous years. Working part-time won’t affect your eligibility much for federal loans.

Federal Student Loan Limits and Interest Rates

Here is some important information to keep in mind. The interest rate for undergraduate Stafford loans, both subsidized and unsubsidized, is 6.39%. The interest rate for unsubsidized Stafford loans made to graduate students is 7.94%. The interest rate for Parent PLUS loans is 8.94%. All Stafford and PLUS loans originated since July 1, 2006 have fixed rates. Since 2013, fixed rates for new loans are set each year based on the 10-year Treasury note following the May auction (4.342%) plus a set margin of 2.05 percentage points for undergraduate Stafford, 3.60 points for graduate Stafford, and 4.60 points for PLUS loans. Rates are fixed for the life of the loan.

Loan limits vary depending on your dependency status and year in school:

Dependent students: $31,000 (including up to $23,000 subsidized)
Independent undergraduates and dependent students whose parents are unable to obtain PLUS Loans: $57,500 (including up to $23,000 subsidized)

Private Student Loans and Unemployment

Private student loans often require income or a cosigner with income. Private lenders may look at wages from a job, freelance work, or other steady income. For private loans, having income increases your chances of getting approved without a cosigner. Some private student loan lenders will look at your future earning potential when deciding if you qualify. They might consider your major, school, GPA, or projected salary after graduation. Some private loan options may consider a student’s earning potential based on their field of study and expected future income. For example, Ascent offers outcomes-based student loans for juniors and seniors applying without a cosigner who would not otherwise qualify based on income requirements. Besides income requirements, some private lenders might require full-time enrollment, while others may accept part-time students.

Cosigners

A cosigner is someone who agrees to take on the loan with you, like a parent, a grandparent, or a trusted adult. For students who are unemployed, have poor credit, or have little to no credit history, applying with a cosigner can improve the likelihood of qualifying for a loan. If you’re a high school or college student with a limited credit history, a private student loan lender may not approve your application. Consider applying with a creditworthy cosigner, an individual with strong credit who can take responsibility for the student loan with you. When asking someone to cosign a loan for you, make sure you both understand what it means. You and your cosigner need to be clear on who’s going to make the loan payments each month. Being a cosigner is a serious commitment, but it doesn’t need to be a lifelong one.

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Other Options for Funding Education

There’s no shortage of loan options to help you pay for school if you’re unemployed or working with a limited income.

Work-Study Programs

Work-Study is a federal program that allows students to work part-time to help pay for tuition.

Scholarships and Grants

Scholarships are free money based on things like academic achievements, extracurricular activities, or additional criteria like community involvement and interests. Maximize your federal student aid by completing the FAFSA® (Free Application for Federal Student Aid) every year you're in school. And don’t forget to apply for scholarships-it’s free money you don’t have to pay back.

Managing Student Loans During Unemployment

If you’re still short of funds and concerned about meeting student loan eligibility requirements, don’t worry. If you need to delay repayment or temporarily stop making payments on your federal student loans, check here to see if you are eligible for a deferment or forbearance. If you have other loans, contact the lender about income-based repayment programs to help you set up a more appropriate payment plan.

Unemployment Deferment

An unemployment student loan deferment allows you to postpone federal student loan payments for up to 36 months. To qualify, unemployed student borrowers must be receiving unemployment benefits or seeking full-time work. If you've lost your job, an unemployment deferment may be a good choice if you expect to start working again soon.

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To apply for deferment, submit an unemployment deferment application to your student loan servicer. Your application requires one of the following:

Proof of unemployment benefits: You must provide documentation that shows you’re currently eligible for unemployment, such as a copy of benefits from your state’s Department of Labor. This documentation needs to include your name, address and Social Security number.
Confirmation that you’re seeking full-time work: You must have made at least six attempts in the last six months to gain full-time employment. You must also be registered with an unemployment agency, unless there isn’t one within 50 miles of your home. You can’t qualify if you’ve rejected any recent offers of full-time employment - even if you were overqualified for the position.

If you meet the requirements for unemployment deferment, your servicer cannot deny your application.

Interest Accrual During Deferment

If you have unsubsidized or parent or grad PLUS loans, interest could build on your student loans during deferment. If you don't pay the interest as it accrues, it will capitalize (be added to the loan principal) after your deferment period ends. This could bump up the total amount you must repay over the life of your loan. Subsidized and Perkins loans are exempt from interest accruing during a deferment.

You can receive up to 36 months of unemployment deferment, but you’ll need to reapply - and meet the indicated qualifications - every six months. Deferment length also varies by loan type. If you have Federal Family Education Loan Program, or FFELP, loans from before July 1, 1993, you may be eligible for additional deferments. Perkins borrowers can receive 36 months, with eligibility reviewed annually. All unemployment deferments end once you’ve exhausted your eligibility or gotten a job. Once you’re working full-time, you must let your federal student loan servicer know immediately.

Other Options for Reduced Loan Payments

If you’ve returned to work or otherwise don’t meet the requirements for an unemployment deferment, other options that reduce payments can keep you out of student loan default. The best choice will depend on your financial situation:

Income-Driven Repayment (IDR) Plans: Income-driven repayment plans set your monthly payments at a percentage of your discretionary income. These plans extend your repayment term to 20 or 25 years, potentially increasing the amount you repay.
Economic Hardship Deferment: Economic hardship deferment is available if you’re working full-time and meet one or more of the following qualifications: serving in the Peace Corps; receiving assistance from a program such as the Supplemental Nutrition Assistance Program (SNAP); or earning less than 150% of the poverty guideline for your family size and state of residence.
Student Loan Forbearance: Student loan forbearance lets you pause payments at the discretion of your lender. It’s not a good long-term option since interest accrues on all loans, but forbearance can offer temporary breathing room. Consider signing up for a temporary forbearance, which can last up to nine months in a 24-month period. Interest will accrue in all cases.

Private Student Loan Relief Options

Private lenders may let you postpone payments or provide alternative repayment options if you’re unemployed or facing financial hardship. Interest typically accrues during these breaks, increasing the amount you owe.

Important Considerations

It is important that you seek help and if you are unable to do so, that you seek help. Here is some important information to keep in mind. Student loans, both federal and private student loans must be repaid. Borrowers may defer payments for up to three years. For Parent PLUS, Graduate PLUS, and unsubsidized Stafford Loans, interest continues to accrue. There are several income-driven repayment plans that can help keep payments more manageable by capping them at a percentage of the borrower’s income.

Public Service Loan Forgiveness

Public Service Loan Forgiveness is available after 10 years of qualifying payments and employment, only for Direct Loans (excluding Parent PLUS).

Teacher Loan Forgiveness Program

The Teacher Loan Forgiveness Program (Stafford only) is available for loans in both the Direct and FFEL programs. Teachers with Perkins loans may be eligible for a loan cancellation if they meet certain requirements.

Direct Consolidation Loan

Borrowers with Direct and/or FFEL loans can convert them into a Direct Consolidation loan. There is no fee.

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