Your responsibility to pay your student loan debt doesn't stop once you're eligible for AARP. Once you retire, you'll have to keep paying on your federal student loans until you pay them off or you die, whichever comes first. The same is true of your private student loan debt. You'll keep paying those until you pay them off, die, or the statute of limitations runs out.
The reality is that there's no student loan forgiveness for retired Americans. Your loan servicer expects you to keep paying on your student debt -- even if that means borrowing from your retirement savings.
How can I afford my student loan payments in retirement?
With federal student loan debt, it's going to be reasonably simple to keep your student loan payments low once you reach retirement age.
The U.S. Department of Education offers income-driven repayment options for federal loans. Those repayment options allow you to pay back only what you can afford, no matter the amount of your outstanding student loan debt.
Those repayment options include:
- Revised Pay As You Earn Plan (REPAYE)
- Pay As You Earn Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR_
IMO, choose the ICR plan only if you borrowed Parent Plus Loans for your child. Because Parent Plus Loans don't automatically qualify for income-based loan repayment options, you may need to get a consolidation loan for your Parent Plus Loans before you can pay them under the ICR plan. Contact your loan servicer to find out your options.
Seriously, I have clients who are over 70 years old and owe $100 thousand or more in student loans, and their monthly payment is $50. Sure, that payment isn't enough to cover the interest rate that accrues each month, but that doesn't matter. Federal student loans go away when you die. They don't follow your spouse, your kids, nobody. The federal government simply forgives your loan balance.
- Can a Parent Plus Loan be Transferred to a Spouse or Child?
- Can Social Security Benefits be Garnished for Student Loans?
Private student loan repayment
Private loans are different. Private loan servicers don't offer their student loan borrowers income-based repayment options. The most they're willing to provide you with are deferments or interest-only payments.
At some point, deferments will run out, and your personal finance situation won't let you make those interest-only payments. So what do you then?
You have 4 options:
- look into refinancing or getting a co-signer release
- stop making your monthly payments
- negotiate a private student loan settlement
- file bankruptcy to discharge private student loans
Of course, if you stop paying, your credit score will drop. But you don't have to worry about wage garnishment, or your social Security benefits or retirement accounts being garnished.
Private lenders can't forcefully take money from you until they sue you and get a court order authorizing them to take money from you.
Student loan forgiveness options after retirement
There are no major student loan forgiveness programs designed for retirees.
As I shared above, you're expected to keep paying even though the only money you have comes from your retirement plan or Social Security benefits.
The only loan forgiveness you can look forward to is the same loan forgiveness other student loan borrowers have access to, namely:
- Public Service Loan Forgiveness
- Total and Permanent Disability Cancellation and
- Income-Driven Repayment Plan Forgiveness
Those programs apply only to federal student loans, however.
There are no private student loan forgiveness programs.