I am now 67 years old and owe three times what I borrowed in student loans. What can I do?

Borrowers with less-than-perfect credit records face challenges climbing out of debt, and they can steepen as you get older because income tends to decline.

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Ask: My student loans are over ten years old, I don’t work in the field I graduated from, and one of the schools has closed. I can’t afford to retire – I’m 67 years old and I can’t live on Social Security alone. I paid and was pawned and now it’s triple what I borrowed. I’m expected to pay $600 a month. I can’t afford to feed myself. What can I do?

Reply: Borrowers with less-than-perfect credit records face challenges climbing out of debt, and they can steepen as you get older because income tends to decline. Pros offer steps to help you navigate from potential loan relief from closed school to income-based repayment plans that could significantly lower your payments. (Note that if you refinance your federal loans, you won’t have any income-based repayment plans available, so you probably don’t want to go that route. However, for borrowers with private loans, refinancing may be attractive now that interest rates are low.)

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Student loan borrowers who are nearing retirement are in a difficult position, especially if they’ve taken a forbearance or two or if they’ve had a past default that has slowed them down, says Anna Helhoski, expert for student loans at NerdWallet. “Interest also takes its toll over the years,” she says.

So much so that an initial loan of say $20,000 can triple into $60,000 of debt thanks to time, interest and penalties, says Andrew Pentis, a credit expert and certified student loan advisor at StudentLoanHero.

“It’s actually very common,” adds Pentis. His company’s research shows that “the vast majority of borrowers” don’t repay their loans on a standard ten-year schedule. “They usually linger for years and years.”

Defaulting federal student loan borrowers may have Social Security benefits or, for that matter, tax refunds that are confiscated to pay their overdue debts. “That’s the rules at the moment,” says Pentis. “In some cases, a borrower could see their entire federal payments being confiscated, depending on the amount of their debt and Social Security.” (Until November 1, 2022, the government has suspended confiscating such payments.)

Experts agree that the best possible way for this borrower to reduce the monthly burden would be to apply for an income-based amortization (IDR) plan. There are four and all are designed to maintain affordable monthly payments relative to income.

“This could be especially helpful for borrowers looking to retire as it will lower your monthly payment. If your payment is low enough — less than the interest portion of your payment — the government can pick up some of the interest and the rest could eventually be forgiven,” says Helhoski. “It takes a long time — up to 20 years after you sign up for an income-based repayment plan.”

Oversights can complicate things, Pentis admits. “It’s not too late for IDR,” he says. “They would have to rehabilitate or consolidate their loan with the federal government by catching up and making payments. It’s very unlikely that they’ll be able to catch up quickly because they just don’t have the income to do it.”

Pentis recommends consulting a certified student loan or credit counselor and enrolling in a debt management plan that takes into account balances on loans, credit cards, and other sources. You can work with borrowers to put together a plan to stave off these garnishments and put them on the path to becoming debt free. This frees up revenue for meals.

Regarding the borrower’s point of view that they are not working in the field they studied at the college, Leslie Tayne, founder and CEO of Tayne Law Group, points out that this is not relevant to student loan repayment. “You can’t negate — or pay for — a degree because your career took a different path into a different industry,” she says.
On the other hand, the fact that one of the academic institutions attended by the borrower is closed deserves attention. “There is such a thing as a closed school release by the federal government,” Pentis says, adding that there are conditions to qualify for a full or partial debt relief. This includes enrolling at closing or de-registering 120 days before closing. Forms on studentaid.gov contain the details.

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