Are You Retiring With Student Loans? Here Is How to Manage Them
Student loan debt is the fastest-growing debt category, and it is no longer limited to young professionals. The number of elderly borrowers (aged 50 and more) with student loan debt has increased from 10% in 2004 to 22% in 2020. In the United States, approximately 8.4 million senior borrowers owe $336.1 billion in student loan debt.
What can older borrowers do now to prevent their retirement security from being jeopardized by student loan debt? Senior borrowers should know about securing their financial future if they take out school debts after they retire. Secure your finances by getting a loan at OakPark (for Emergency Advance)
Speak With Your Partner
When it comes to developing granular repayment arrangements, older borrowers in committed partnerships, especially those merging resources, should lay their cards on the table with their partner or spouse.
“Being open and honest with your partner or spouse means that you can work together to manage or eliminate your debt,” Pentis added.
Don’t try to keep your debt or financial information hidden from each other. At any age, being open about debt in your partnership protects your bond and makes it a little simpler to manage the debt together.
Consider switching to a repayment plan based on your income.
Borrowers with older federal student loans have some good news. According to Pentis, these debtors may opt for an income-driven repayment plan.
What exactly does this imply? By switching to an income-driven repayment plan, borrowers can reduce their monthly payments to a percentage of their limited retirement income. The debt will still exist, but it will remain current, which is the most crucial part, according to Pentis.
“If you work in a low-paying field and have federal loans, it might make sense to use an income-driven repayment. It will help to lower your monthly payment. Seek forgiveness through a program like Public Service Loan Forgiveness, which grants relief after a decade of eligible payments and employment,” Pentis said.
Should elder borrowers hope for loan forgiveness or cancellation of their school loans? No, because this does not ensure that one’s Social Security funds are kept safe. While there are worldwide cries for mass student loan forgiveness, Pentis recommends that borrowers use existing federal, state, and employer-based help programs.
Begin to make granular plans.
Older borrowers, according to Pentis, can construct granular debt repayment plans after they understand the optimal technique for repaying student loan debt. To pay off debt, consider debt avalanche or debt snowball strategies. Some borrowers may also consider changing occupations to qualify for federal, state, or employer-based loan repayment help.
Look for help
What if you can’t retire because you’re on an income-driven repayment plan for your federal student loans? What if you have a private student loan with a high-interest rate that you can’t afford to repay? It’s time to get financial advice from a knowledgeable specialist.
Where may senior borrowers get help? Pentis advises talking to a licensed student loan or credit counselor first. These folks should work for a non-profit credit counseling organization that provides free or low-cost consultations. They can then help older borrowers find a solution, such as a debt management plan that would consolidate their debts into a manageable monthly payment in the context of their retirement.
Make a financial strategy for yourself.
According to Andrew Pentis, a certified student loan counselor at Student Loan Hero, the first step for anyone approaching retirement with student debt is to develop a strategy. This technique only provides two specific options. You must either decide how you will rapidly pay down school debt in preparation for retirement or manage residual student debt in retirement.
Allowing your student debt to become delinquent or defaulted is a bad idea. Delinquent or defaulted debts, according to Pentis, might result in the confiscation of Social Security benefits, tax refunds, and other federal benefits that are critical during retirement years.
Your financial condition will determine your strategy and the types of student loans you have, including private and government loans. In some circumstances, it makes sense for borrowers to repay their loans quickly, but in others, patience is required.
“For example, if you have good credit and a steady income, you may refinance your high-interest private loan to acquire a much lower APR and start making extra payments to pay off the total as quickly as feasible,” Pentis added.