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I am 75, and my husband is 83. I have been paying on my student loans for 16 years and the balance has gone from $200,000 to $235,000.
I am on an income-driven repayment plan and work primarily to pay my loans. My IDR payment is $1,056 as of today. I also draw on Social Security. In the event that I default, the penalty is to attach a 15% withdrawal from my Social Security payments, it seems more practical to default and pay only $215 per month versus more than $1,000-plus. Your thoughts?
-J.
Dear J.,
The reality is that you’re never going to be rid of these loans. You probably don’t want to work until the day you die. And even if you did, it’s still highly unlikely that you’d climb out of student debt.
But I don’t think you need to default, which would destroy your credit on top of putting part of your Social Security at risk. The better solution is to get your student loan payments as low as possible and then make the bare minimum payment. That means you’ll need to be OK with seeing the balance creep higher and higher each month. Federal student loans are forgiven upon the death of the borrower, so you wouldn’t need to worry about your husband or anyone else being on the hook for this debt when you die.
Let me clarify for readers that the advice I’m about to give applies to federal loans only — and since you’re on an income-driven repayment plan, your loans are clearly federal. Unfortunately, those with private loans have far fewer options for relief. Anyone reading who’s struggling with private student loans should contact their servicer to see what options are available.
In your situation, I wouldn’t be making loan payments at all as long as federal student loan forbearance is in effect. Taking advantage of 0% interest rates to knock out as much principal as possible will make sense for some borrowers who plan to pay off their loans in full, especially if they have no high-interest debt….
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