Your Financial Guide to Student Loans and Pregnancy

Bringing a little bundle of joy into this world stirs up a lot of emotions. You’re excited, you’re nervous and you might even dread certain aspects of it. This can be especially true when considering financial factors, like managing student loans and pregnancy.

Having a new baby with student loans can add stress to an already enormously stressful situation. So what are your options if you’re going on maternity or paternity leave? Are there any programs to help or steps you should take? Read on to learn more about what you can do if you’re dealing with student loans and pregnancy.

Look at the financials of maternity and paternity leave

Keeping up with your student loan repayment may come down to whether you get parental leave or not. It may also depend on whether it's paid or not. Unpaid leave could affect your bottom line which may make it difficult to maintain your standard monthly loan payments.

First, you’ll want to look at the nitty-gritty details surrounding the financials of maternity or paternity leave. The Family and Medical Leave Act of 1993 allows employees to take unpaid leave for a set period of time. Emphasis on the ‘unpaid’ part.

Unfortunately, in the U.S., there is absolutely no requirement for employers to provide paid Parental Family Leave (PFL) coverage. If you’re lucky, your employer might offer some duration of Parental Family Leave.

The report “Paid Family Leave in the United States” by the Congressional Research Service, says that, “According to a national survey of employers conducted by the Bureau of Labor Statistics (BLS), 16% of private-industry employees had access to PFL through their employer in March 2018.”

This percentage isn’t very encouraging. But you'll still want to ask your employer about the specifics of its parental leave benefits, if any.

Talk with your employer and make a plan

Start by gaining a better understanding of what benefits your employer offers (or doesn't offer). Is there a paid parental family leave option? If so, for how long? Is it unpaid, and how much leave is offered in this scenario? If none of these are options, are there any other leave options that can be considered?

Once you have this information, you’ll want to sit down with your current budget.

• What, if anything, will the parental leave policy cover?
• Will you need supplemental income to maintain your quality of life and meet your financial obligations?

If your parental leave will cover your financials, and you think you can afford it, keeping your student loan payments as-is will likely be best. However, if your income will be at a loss due to the leave, you don’t want to have all of your cash held up making your student loan payments.

In that case, you might want to put your monthly payments on pause. You can also consider lowering your payments to make them more manageable with baby in tow.

Putting your student loan payments on hold

If you'll be at a financial loss due to PFL, consider halting your student loan payments temporarily. Even if you’re not at a loss, minimizing the stress of making payments as you learn to navigate your new budget and financial costs with a baby might be beneficial.

If you have federal student loans, talk to your loan servicer about options for a deferment period or forbearance. In some cases, you may qualify for student loan deferment for maternity leave.

Student loan deferment for maternity leave

There is a Parental Leave/Working Mother Deferment Request for borrowers under the Federal Family Education Loan Program. The caveat here is that your loans had to be disbursed before July 1, 1993. Under this program, you can be eligible for parental leave for up to six months and working mothers can be eligible for up to 12 months.

There are strict eligibility requirements for this type of deferment. For example, you must be pregnant or caring for a baby less than six months old to qualify for parental leave. Note that documentation is required, such as a physician's statement of pregnancy or a birth certificate.

It's best to reach out to your loan servicer directly to learn more about this option. Here's Navient's parental leave deferment information as a reference.

General forbearance

There are two types of forbearance for federal student loans: general and mandatory. Mandatory forbearance requires certain employment or financial requirements so if you’re dealing with student loans and pregnancy, a general forbearance is best.

A general forbearance can be referred to as a “discretionary forbearance”. This is because it’s at the loan servicer’s discretion to approve your request.

According to the Federal Student Aid website, you can request a general forbearance due to:

• Financial difficulties
• Medical expenses
• Change in employment
• Other reasons acceptable to your loan servicer

You’re likely to experience all of the above as you enter parenthood, so it doesn’t hurt to ask your loan servicer.

General forbearances are given 12 months at a time. If after that time you still need additional time, you can request another forbearance. There are no hard and fast limits on this type of forbearance, though your loan servicer may put some limits in place.

Forbearance with private loans

If you have private student loans, your options are a bit different. For example, Sallie Mae offers forbearance, but it’s typically in the case of financial difficulty. Perhaps you fit the bill, but there’s no guarantee your private student loan lender will approve forbearance during maternity leave. In general, it may be tough to get approved.

If you are approved by Sallie Mae, for example, you could get a forbearance of three months with the possibility of extending it for up to 12 months. Keep in mind you might have to pay a “good faith” payment (e.g. $50, with a max of $150) to participate in this program.

Lowering your student loan payments

If you can still afford to make some financial contribution toward your student loans but would like to lower your student loan payments, consider opting for an income-driven repayment plan (IDR).

Under IDR, you can modify your federal student loan payments so that they’re a small percentage of your discretionary income.

The four IDR programs are:

• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)
• Pay As You Earn (PAYE)
• Saving on a Valuable Education (SAVE), formerly called REPAYE

These four programs limit your payments to 10% to 20% of your discretionary income with the option for loan forgiveness after 20 or 25 years of qualifying payments. All of that will depend on your eligibility when you borrowed, and the type of schooling. Talk to your loan servicer ASAP about these options to see what is the best fit. For more information, read our guide on income-driven repayment plans.

Use your tax credits and deductions

Having a baby with student loans is stressful especially when you’re trying to manage it all. That’s why you can take advantage of any tax credits and deductions available to ease the financial cost.

Depending on your income as well as your filing status, you could be eligible for the student loan interest deduction which is up to $2,500. If your modified adjusted gross income is less than $85,000 if single or less than $170,000 if married filing jointly, you may qualify.

Additionally, you may be eligible for a $2,000 child tax credit, and depending on your income and filing status you may be eligible for the Earned Income Tax Credit (EITC). The EITC, according to the IRS, is available for people with low- to moderate-income. In order to qualify, your adjusted gross income (AGI) must be less than a certain threshold based on your filing status and family size.

When returning to work, you may be eligible for child care credit and you could qualify for a child care reimbursement account.

You want to take advantage of any tax deductions and credits that you may qualify for now given your new situation.

Take action

Having a baby with student loans can be stressful but it’s possible to navigate parenthood and student loan repayment. Though it’s frustrating and another expense, you can manage your student loan payments through the options listed above to make this milestone a bit easier on you financially.

The key is to take action immediately by talking to your loan servicer to get a plan in place. This can prevent you from going into default, which can cause additional financial stress in a time when you should be enjoying parenthood.

Have you had to make student loan payments while in paternity or maternity leave?