Golden Years Not So Shiny – Retiring With Student Loan Debt
March 26, 2013

While student loan protests center around recent graduates lamenting their debts alongside a lack of job opportunities, at least they’ve got years and years to deal with their debt. But what’s more disturbing is the number of older Americans who are still struggling with student loans as they head into their golden years. But with onerous monthly payments servicing this decades old debt, how golden will those years be?

For student loan borrowers age 50-59, average student loan debt is $23,183 and for those 60-69, average loan balance is $19,225. That’s a whopping big amount of debt for retirees on a fixed income. Roughly 17% of student loan debt is owed by consumers aged 50 and up. This amount of debt is nerve wracking for anyone, but for seniors, it must be even more so.

For seniors struggling to make loan payments and keeping up, their finances are no doubt tight. And the bad news is, there’s simply nowhere to run when it comes to student loans. Unlike most every other debt, there no time limit on collections – as long as you’re alive, your student loan debt is too. And if you’re a senior whose loans are in default, the Feds can seize your tax refunds and even garnish your already thin social security payments.

As of last year, over 122,000 seniors have their Social Security benefits reduced to cover delinquent student loans. What may help some older student loan debtors to tackle their student loan debt is to pursue an income based repayment plan. This may result in much lower payback options than any other program. The problem is that private student loan collection services haven’t always been forthcoming about the best options for borrowers because they were incentivized to maximize amounts collected rather than assisting borrowers.

But now that the Obama administration has cut collection fees on student loans, perhaps borrowers will be presented with all of the options available to them rather than just the ones that benefit collection firms! One of the best income based repayment plans allows borrowers to pay back just 15% of their discretionary income. Discretionary income is defined as 150% above the federal poverty line (currently $16,755).

For instance, if you are subsisting strictly on Social Security payments of $2,513 per month, your total annual income is $30,156. From there, you subtract $25,132 (150% x $16,755) to get discretionary income of $5,024 and then 15% of that would be $754.  This would give you monthly payments of roughly $63. That’s a pretty affordable amount and after 25 years, the remaining amount of the loans would be forgiven.

If you are a senior and are paying in excess of what you could be on your student loans and it’s stressing your finances, you have options. Sign up for’s free student loan management tool and use it to contact your lender about changing to an income based repayment plan. If you’re paying student loans you took out for your children, this type of repayment is not an option, but you can consider a loan consolidation plan or graduated repayment plans.