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Programs to repay student loans target unemployed grads

New public, private and college-based programs are targeting a grim and growing market: unemployed college graduates who can’t afford to repay their student loans.

This week, BridgeSpan Financial, a start-up based in Washington, D.C., introduced SafeStart, a product designed to protect borrowers from the risk of defaulting on their loans. For an upfront payment of $40 to $60 per $1,000 of student debt, SafeStart will provide an interest-free line of credit that borrowers can use to repay federal student loans for up to five years after graduation.

To tap the line of credit, the graduate must be unemployed or have loan payments that exceed 10% of income. Once the borrower’s circumstances improve, the individual has up to five years to repay the interest-free loan.

Currently, borrowers with federal student loans who are experiencing economic hardship can postpone payments for a specific period of time by applying for deferment or forbearance. But depending on the type of loan, interest may accrue during that period, leaving borrowers even deeper in debt, says Carlo Salerno, a principal for BridgeSpan.

Also targeting cash-strapped borrowers: