What to know about student loans

The thousands of federal workers newly laid off by the Trump administration face numerous financial challenges, including finding new health insurance and keeping up with recurring bills. Another key task: Figuring out what to do about their monthly student loan payment.

The permanent job cuts — which Russell Vought, director of the Office of Management and Budget, announced on Friday — are formally known as “Reductions in Force,” or RIFs. The RIFs will strip many federal workers of certain benefits related to their student loans and make it harder for them to repay their debt.

However, there are options available that allow borrowers to pause their payments or request a lower payment during difficult times.

Here’s what federal workers should know about their student loan options.

Often, federal agencies provide their employees with student loan repayment assistance of up to $10,000 per year, said higher education expert Mark Kantrowitz. In total, federal workers can get up to $60,000 under the U.S. Office of Personnel Management program.

In 2024, more than 16,500 federal employees collectively received around $150 million in student loan repayment benefits, according to an OPM report.

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“This is one of the key perks that help attract recent college graduates to working for the federal government,” Kantrowitz said. “But, when a borrower’s employment is terminated, they lose this benefit.”

Federal workers should not need to repay any benefits they’ve received before the RIF, he added.

Government workers who were working toward Public Service Loan Forgiveness will not receive credit for the program during their period of unemployment. PSLF offers loan forgiveness to certain public servants after a decade.

Borrowers will retain credit for qualifying PSLF payments they made before the RIF.

Federal student loan borrowers who are laid off from their jobs are usually able to sign up for an income-driven repayment plan and get a lower payment, or even a $0 bill. IDR plans limit borrowers’ monthly payments to a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.

While IDR plan applications may be delayed during the government shutdown, you should be placed in a temporary forbearance after you submit your request, Kantrowitz said. You won’t need to make a payment for that period, but interest may continue to accrue on your debt.

Any unemployment benefits you collect will count as income in the U.S. Department of Education’s calculation of your monthly bill. Even so, those payments often come out to far less than what a person was earning while employed, according to a 2023 report from the National Employment Law Project.

One important thing to note: The government may calculate your monthly payment obligation under an IDR plan based on your last filed tax return, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

But if your earnings have dropped recently, “you can provide proof of your current income instead,” Nierman said.

Borrowers who were caught in a RIF may also be eligible for an Unemployment Deferment. Under that option, the Education Department often allows you to pause your payments if you’re receiving unemployment benefits or looking for and unable to find full-time employment, among other requirements. (Some student loans will still accrue interest during the payment pause, while others will not.)

Recent legislation will do away with the Unemployment Deferment for those who take out student loans after July 1, 2027. But current borrowers will maintain access to the relief option.

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