Dear Penny,
I'm 75 and my hubby is 83. I have been paying down my student loans for 16 many the balance has gone from $200,000 to $235,000.
I'm with an income-based repayment schedule and work primarily to pay off my loans. My IDR payout is $1056 currently. I also rely on Social Security. If I default, the penalty is to fasten a 15% withdrawal of my social security payments, it seems better to default and just pay $215 a month versus over $1,000+. Your ideas?
-J.
Dear J,
The the truth is you won't ever eliminate these loans. You probably don't wish to work before the day you die. And even if you did, it's still highly unlikely that you will get out of student debt.
But I don't want to default, which would destroy your credit along with jeopardizing a part of your social security. The best answer is to minimize your education loan repayments and then make the minimum payment. This means that you will have to accept seeing the balance climb increasingly more every month. Federal student loans are forgiven around the death from the borrower, which means you do not have to be worried about your husband or another person being accountable for your debt when you die.
Let me inform you to readers the advice I'm about to give only applies to federal loans – and also, since you're on an income-based repayment schedule, your loans are clearly federal. Unfortunately, individuals with private loans have far fewer choices for relief. Anyone reading and having difficulty with private student education loans should contact their service agent to determine what choices are available.
In your situation, I would not make any loan repayments while federal education loan forbearance is within effect. Taking benefit of 0% rates of interest to eliminate just as much capital as you possibly can can make sense for some borrowers who intend to pay off their loans in full, particularly if they do not have high-interest debt. But as your goal should be to payout your loan as low as possible, obviously you will want to pay $0 per month provided possible.
While forbearance is in effect, all those $0 payments still count as one-time payments for income-driven repayment plans. You can speak to your service agent to request a refund for all payments you earn since March 2022. If any of your student debt includes private loans, make use of your federal loan repayments to eliminate because the debt as possible. balance.
It's a short-term solution, obviously. As of this writing, forbearance is placed to finish on August 31, 2022. I would not rely on a further extension of this deadline. But considering it's already been extended six times, I certainly wouldn't be surprised if borrowers get another reprieve either.
In the long term, the easiest option would be to prevent working. You're with an income-based repayment schedule, which means your payments are capped at 10% to 20% of the discretionary income, with respect to the kind of plan you're enrolled in.
It looks like you are making a pretty decent amount in case your payments are $1,056, and i am guessing you're paying extra every month. If you had been to retire, your discretionary income would undoubtedly decrease significantly, which would also lower your payments, because they are based on income and family size rather than loan balance.
A group of two residing in the low 48 states with an adjusted revenues of $40,000 could expect monthly obligations of between $104 and $362. The same family with $100,000 of revenue would pay between $604 and $1,362. But retirees who live totally on Social Security sometimes end up with $0 payments. You will need to continue to make an application for recertification each year to keep your loan up to date.
Under income-driven repayment plans, the remaining balance of the education loan is generally canceled after Two decades, although for many plans it's not canceled until after 25 years. You've been paying for 16 years already, so the discount might be in sight. Historically, canceled loan balances were taxable as everyday income, but underneath the US bailout enacted in 2022 for COVID-19 relief, balances canceled through 2025 are not taxable. Some observers believe that it is entirely possible that Congress can make this pause permanent.
If you have health problems making it difficult to work, you might want to discuss with your doctor whether you meet the requirements for a Total and Permanent Disability (TPD) discharge. To qualify, you've got to be permanently unable to work. Many older borrowers meet the requirements, but don't know they qualify. This is among the few cases where you'd be eligible for a full pardon should you qualify.
The much more likely scenario, however, is that you will need to treat these loans the same way you would treat a chronic health problem. The disease may not be cured, but you could make the signs and symptoms manageable.
Trying to get out of debt? Here are 50 methods to make extra money this month.
Robin Hartill is really a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your tricky money inquiries to [email protected]
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