Why New Grads Shouldn’t Fear a Recession

In 2023 alone, there have been over 118,000 U.S. tech layoffs, according to Crunchbase News, a business publication. That’s in addition to two major bank collapses and two federal rate hikes. The class of 2023 will graduate into this economic upheaval while facing another variable: student loan payments.

This can be an overwhelming and confusing time for those set to begin repayment of student debt, says Barry Coleman, vice president of program management and education at the National Foundation for Credit Counseling. Coleman cites the expected end of a three-year pause on federal student loan payments, legal challenges to federal student debt relief programs and the potential impact of inflation on the job market as reasons new graduates could feel uneasy.

But new grads don’t need to panic. Here’s how they can weather a potential recession and the financial uncertainty that might come with it.

Have a plan for your student loans, no matter the economy

Understanding your student debt is one of the best strategies to stay on top of your loans, regardless of how the economy is performing, says Betsy Mayotte, founder of The Institute of Student Loan Advisors.

There is typically a six-month grace period after graduation before you’re required to make your first student loan payment. Before this first payment is due, gather details like the types of loans you have and who holds them, advises Mayotte.

Then, know your expected income, your expenses and how your student loan payments will fit into your budget, says Coleman. This will limit any surprises once repayment begins.

If you have a job, pay off student debt faster

If you land a job, you have more flexibility. A steady income gives you the opportunity to explore putting more money toward your student loan debt — if you’re already contributing to your retirement and emergency savings.

For borrowers who have the capacity to make more than the minimum payment on their student loan, this is the chance to get rid of student debt as quickly as possible, notes Coleman, while saving as much money as they can on interest.

And don’t overlook your employer.

Twenty-one percent of employers offer company-paid financial services as part of their benefits package, explains Jim Link, chief human resources officer for the Society for Human Resource Management. Programs can include access to financial advisors at no cost to the employee, or even student loan repayment programs — both of which could offer additional protection in a slow economy.

» MORE: How long will it take to pay off your student loans?

If you don't have a job, know your options to stay current

Graduating without a job offer can be terrifying, especially if the economy is expecting a downturn. But with low or no income, you can take steps to stay on top of your student debt, even in a recession.

Start with your loan servicer, the company that manages your loans. Let them know as early as possible that you’re not employed, says Coleman. Ask what your options are to avoid delinquency — which is missing a student loan payment.

There are many repayment options for federal student loan borrowers, says Moyette. You can lower your payments — even to zero dollars — with an income-driven repayment plan, or temporarily stop payments through student loan deferment.

» MORE: The new income-driven repayment plan: How it works

Just note that interest can still accrue while in deferment, and this increases your total student loan balance. Once you land a job and you’re in a position to repay your student loan, do so as soon as possible so you’re not facing a significantly larger debt down the road, advises Coleman.

And while conducting your job search, it may be worth considering a career with a nonprofit organization or government entity if you have federal student loans. These positions could qualify you for Public Service Loan Forgiveness — where your remaining student loan balance is forgiven after 10 years of qualifying payments.

» MORE: Public Service Loan Forgiveness: What it is, how it works

Get free help managing your debt

Even in a slow economy, you can get student loan help from organizations like The Institute of Student Loan Advisors and the Student Borrower Protection Center that won’t charge anything.

Whether you’re exploring how to pay your loans off faster or how to afford the monthly payments, nonprofit organizations like those available through the National Foundation for Credit Counseling can connect you with counselors and help you create an action plan, says Coleman.

However the economy unfolds, new grads can create a strong plan for their student loans that will serve them both in tough and robust economic times.