Is there a strategy that will protect his Social Security?

Headed for Retirement with $345k in Student Loans

by Steve Rhode


Related Articles

The Best Time To Take Social Security Benefits

Baby Boomer's Financial Timeline

Could Debts Ruin Your Retirement?

Question:

Dear Steve,
I've been getting forbearances forever on this loan. I think it is a federal (not private) student loan. And now the balance is up over $345,000. I am 62 years old. At some point, I will no longer qualify for forbearance.

How can I avoid the nightmare of the government garnishing my Social Security payments to pay down this loan?
Douglas

Answer:

Dear Douglas,
Let's hope these are federal student loans. If they are private, you might be screwed.

For both federal and private student loans, the forbearance option is a reasonable short-term solution if you just need some breathing room to get over a quick hurdle. As a repayment option, it utterly and totally sucks.

When you are given the pleasure of not making a payment with forbearance, interest begins to accelerate and the unpaid balance grows faster and faster. It's always interesting that many people select forbearance when they can't afford their loan payments when it only makes the loan less affordable in the future.

At this point, the first option would be to look at putting your federal loans into a new Direct Consolidation Loan and then opting for an income driven repayment plan. This would give you a monthly payment based on your income. And when you move into retirement or a lower income, then your payment would go down as well.

Like forbearance, the income driven repayment plans can grow your balances since the reduced payment you are making may be insufficient to pay the interest. You should read this to understand the downsides.

After 20 to 25 years in one of these programs, the remaining balance owed would be forgiven. This approach will prevent you from falling into collections, which could increase your balance due by 20% or so. It will also prevent you from going into default, which could lead to a tax refund intercept or an administrative wage garnishment of your Social Security.

I think you are just going to have to come to terms with the fact you may never repay this debt, but this strategy will also keep you out of trouble.

Find out if you can benefit from student loan debt help.

If you want to easily confirm if these are federal student loans, you can login to the National Student Loan Data System and verify your loans are listed there. Only federal loans are listed in this database.
Steve Rhode
Get Out of Debt Guy - Twitter, G+, Facebook

If you have a credit or debt question you'd like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.


Take the Next Step:

  • Find out if you can benefit from student loan debt help.
  • Determine if debt could derail your retirement and what you can do about it now. Our checklist can help you. Afterall, one of the most important ingredients for a comfortable retirement is to be debt free when you retire.
  • Subscribe to After 50 Finances. You've learned how to work smarter, not harder. This weekly newsletter is dedicated to people just like you. Subscribers get a FREE copy of our After 50 Finances Pre-Retirement Checklist, a list of everything you need to do to be ready for retirement.

Share your thoughts about this article with the editor.



Stay Connected with TDS




Social Security Choices

Newsmax




You've learned how to work smarter, not harder.

After 50 Finances is a weekly newsletter dedicated to people just like you.

Retirement Checklist
Subscribe

And get a free copy of the After 50 Finances Pre-Retirement Checklist. Everything you need to do to be ready for retirement!

Your Email:



View the TDS Privacy Policy.

Get Out of Debt