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Most recent college graduates are eager to jump into the workforce right after graduation. However, with little experience and steep competition, finding a job right away can be difficult. This may not affect a new graduate’s finances too heavily at first, since most young adults move back in with their parents for a short stint. However, when the grace period for the student loan comes to an end, the graduate may start feeling anxious about how to make the payments with no job in sight.

Like most things in life, the first step is knowing what options are available before deciding on a course of action.

Research each repayment plan before choosing one

Most federal loans offer a number of repayment plans, allowing borrowers to pay off their balances over a period of between 10 and 25 years. Adults who are having trouble finding a job, or are making a very low salary, may want to check the eligibility requirements for the income-based repayment plan, USA Today reports. Under this plan, monthly payments will be calculated based on the adult’s income. Under most circumstances, payments won’t exceed 10 percent of their overall income, according to the newspaper. Borrowers who make all payments consistently and on time for 25 years will have the remainder of their debt forgiven.

In order to apply for this plan, borrowers must contact their lender directly for information. As proof of their financial situation, borrowers may also be required to contact the Internal Revenue Service for a copy of their latest tax return, the newspaper reports.

Adults who don’t qualify for the income-based plan have the option to extend their current repayment period. The standard repayment period is 10 years, but borrowers who have a significant amount of debt may want to lengthen their repayment term to avoid a high monthly bill. Borrowers should keep in mind that if they extend their repayment term to 25 or 30 years, they’ll pay more interest overall.

Those with no income may consider forbearance or deferment

Many young adults who have fallen into a financial crisis or are unable to find employment after their grace period ends can request to put off making payments for a three-year term, the newspaper reports. During the deferment period, the government typically pays the interest on subsidized loans if the adult can demonstrate financial need, according to USA Today. Adults who defer unsubsidized loans will be expected to pay the accrued interest once the deferment period has ended.

Temporary relief can also be provided through forbearance, an option that imposes looser eligibility criteria than those applied to deferments. Graduates considering forbearance should keep in mind that interest will accrue during the three-year term.

Young adults graduating from college should pay close attention to their student loan payments. Because most recent graduates don’t have a great deal of credit built up, early mistakes can lead to financial hardship down the road that may take years to repair. One missed payment will immediately result in a negative mark on their credit report, which may jeopardize their financial future. Negative payment or default information will not only remain on an individual’s credit report for seven years, but will also do harm to his or her credit scores.

Unfortunately, this can cause further pain for the graduate in the job market, too.  While most advocacy groups have fought ardently against the use of credit reports in the hiring process, the practice is still common in the business world.

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