I'm 68 years old, have worked for the last thirteen years in a
state psychiatric hospital and after consolidating all my loans, have
never missed a payment to Direct Student Loan in the last ten years.
My original paper work says that I will need to make payments until
2031, when I'll be 88. I would like to think about retiring sometime
soon, but the payments would take 1/3 of my Social Security.
Any suggestions on limiting how long I would have to pay?
Ideally, people who are about to retire should have no remaining debt,
whether in the form of student loans, credit card debt, auto loans, or
mortgages. For many people, retirement means a reduction in income.
Retirement benefits are needed for living expenses, not to make
monthly loan payments.
Unfortunately, the obligation to repay federal student loans does not
end with retirement, even though the means to repay the debt are much
more limited. If a retired borrower defaults on his or her federal
education loans, the federal government may offset up to 15% of the
borrower's Social Security disability and retirement benefits to repay
the defaulted loans.
However, borrowers who have little or no retirement income other than
Social Security retirement benefits and their federal student loan
debt exceeds their retirement income should consider switching
their federal student loans into the income-based repayment
plan. Income-based repayment may significantly reduce or even
eliminate the monthly loan payments for retired borrowers with very
The current version of the income-based repayment plan caps the
monthly loan payments at 15% of the borrower's discretionary income,
where discretionary income is the amount by which adjusted gross
income (AGI) exceeds 150% of the poverty line. Any remaining amount
owed will be forgiven after 25 years in repayment. Only payments made
under the income-based repayment, income-contingent repayment or
standard 10-year repayment plans count toward the 25-year forgiveness.
The economic hardship deferment also counts toward the 25-year
If a borrower is not required to file a federal income tax return,
the borrower will have to submit an
Alternative Documentation of Income
form to calculate a substitute for AGI. This form asks the borrower to
list all taxable income the borrower is receiving, such as income from
employment, unemployment benefits, dividends, interest, alimony and
the taxable portion of Social Security benefit payments. Untaxed
income, such as the tax-free portion of Social Security benefit
payments, Supplemental Security Income, child support and federal or
state public assistance is not reported.
Although a retired borrower may not live to reach the 25 year
forgiveness milestone, the total payments under income-based repayment
may still be significantly lower than the other options for someone on
fixed income. (Note that federal education loans are discharged if the
borrower dies or becomes totally and permanently disabled. So if the
borrower dies before the loans are paid in full, the remaining debt
will not be charged against the borrower's estate.)