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Dear Penny, I Have $ 84,000 In Student Loans. Can I Retire Next Year?

Dear Penny, I have $ 84,000 in student loans. Can i retire next year?

Dear Penny,

I owe about $ 84,000 in student loans and for several years I only paid the interest because I could afford it. I’m currently paying $ 224 a month. I’m 60 years old and I want to retire in a year. I feel like I will never get out of this guilt.

What’s the best way to tackle this huge amount knowing that when I retire in a year my income will be cut in half?


Dear L.,

I doubt you will find any consolation knowing how many of your colleagues are facing the same battle. But indulge me while I just share a scary status.

According to the Federal Reserve Bank of New York, the number of people aged 60 and over on student loans quadrupled between 2005 and 2015. Its ranks include people who went into debt to educate themselves and those who took out or co-signed a loan for a child or grandchild – or in many cases a combination.

You asked how to “approach” your $ 84,000 balance and unfortunately there are no easy answers. Student loans are seldom callable, even in bankruptcy, as you will painfully know.

Since you are already struggling with payments while you are still making a paycheck, I am concerned about your risk of default, which can result in part of your Social Security checks being garnished when you have federal loans. Or that you have to write down your base expenses on a high yield credit card to keep your credit up to date.

If you are determined to retire next year – and we’ll get to your schedule in a minute – the goal of $ 84,000 in debt is not realistic. A better question is: How can I alleviate the pain of retirement with student loan debt? Here you have options.

First, make it a priority to keep your monthly payments as low as possible.

The best way to do this when you have federal student loans is to enroll on an earnings-based repayment plan.

These plans limit your monthly payments to 10% to 20% of your discretionary income, and your remaining balance will be paid out after 20 or 25 years.

If your income is below 150% of federal poverty, you may not have to make payments to stay up to date.

You can apply on the U.S. Department of Education website at or using a form available through your loan service provider.

All you need to know is that in the long run you will often pay more interest because you will extend the payback period and owe tax on the amount given.

If you are having trouble making payments on a personal loan, contact your lender for information on specific options. A private lender won’t be as flexible as Uncle Sam, but the good news is that if you default, private lenders won’t be able to get social security and other government benefits.

But ultimately, my question for you is: can you afford to retire in a year? If you have health issues, caring responsibilities, or mandatory retirement, this date is likely beyond your control.

If you have leeway in your time frame and plan to survive on half your income – for example, if you paid off your mortgage and car loan in a year – and work a few more years while living like you, I’ll be retired and will pay me off immensely.

Your number 1 priority is a happy and healthy retirement. Even with student loan debt, there is a way to get there.

Robin Hartill is the Senior Editor at The Penny Hoarder and the voice behind Dear Penny. Send your questions about student loans to [email protected]

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