Can we retire in 6 months with $ 190,000 in student loan debt?


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Dear Penny,

I am in great difficulty. My husband and I have a combined student debt of $ 190,000 and we were planning to retire in six months.

My husband wants to sell our house and pay off the debt. If we do this, we won’t have a lot for a down payment on another house, so we won’t have a low mortgage payment. If we don’t sell, we can pay the student loan repayments. But we will be very limited with no more money to save for emergencies.

Help. I spent many sleepless nights trying to find the best solution to this.


Dear H.,

If you could seriously reduce your balance by working an extra year or two, this is something to seriously consider. But the reality is that $ 190,000 is a lot of money. Delaying retirement for a few years may not be enough to make significant progress.

About 20 percent of federal student loan debt is held by people 50 and over. Telling millions of people like you and your husband that they have to work forever is simply not a viable solution.

I reached out to Betsy Mayotte, president and founder of the nonprofit The Institute of Student Loan Advisors, to discuss strategies for people approaching retirement with large student loan balances. She has advised thousands of student borrowers on the best way to pay off their debt. She pointed out how common your dilemma is.

Robin hartill [ The Penny Hoarder ]

“I think a lot of people don’t realize that student debt is no longer just a problem for young people,” Mayotte said. “I get questions like this all the time.”

The options available to you depend on several factors. First of all, are they federal loans, private loans, or a combination of the two? Second, if you have federal loans, is the debt from your own education or have you taken out Parent PLUS loans for your children? While many baby boomers are in debt because they paid for their children’s education, many have loans because they went back to school during the Great Recession, according to Mayotte.

It is only on rare occasions that student loans are dischargeable in bankruptcy. You probably wouldn’t be a good bankruptcy candidate because it looks like you have decent home equity.

Unfortunately, there are no great relief options if you have private loans. Selling your home and downsizing so you can pay off your balance, or at least a large part of it to make your payments more affordable, may be your best option.

But if you have federal loans, you have several options. Instead of paying off your loans, a better alternative may be to get your monthly payment as low as possible, even if that means you’ll never be completely out of debt.

If you have federal loans, including Parent PLUS loans, Mayotte suggests that you look into a program called Payback Based on Income. You will need to consolidate your loans to enroll. The advantage is that your payment will be 20 percent of your disposable income, which will likely be less after retirement.

“They renew their application every year and if their income goes down, the payment goes down,” Mayotte said. “If their income goes up, the payment goes up. If they still have a balance after 25 years, the balance is forgiven.

You have even more options if you have federal loans you’ve taken out for yourself, including Income Based Repayment, Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). These programs make loan repayments as low as 10-15% of your discretionary income, and they also offer a discount at the end of the repayment period, which is between 20 and 25 years.

Traditionally, the canceled balance on all of the federal student loan programs I mentioned has been treated as taxable income for the year the debt is canceled. But thanks to COVID-19 relief measures, any balance canceled by 2025 is not treated as taxable income. Moyette wouldn’t be surprised if Congress finally extended this tax break. But if you choose to enroll in a program that offers forgiveness, she suggests preparing for the worst but hoping for the best, because 20-25 is a long way off.

If you have incurred some of this debt for your children, it might also be time to look beyond assistance programs and ask your children if they can help you with the payments. “It’s a tough conversation, but sometimes it’s a conversation that needs to be held,” Moyette said.

Assuming you have options to lower your monthly payments, it really depends on your personal preferences. If you think you’ll sleep better knowing you don’t have that balance hanging over you, it may be best to downsize and pay it off, even if that means having a mortgage payment.

But there is nothing wrong with treating this debt like a chronic illness that has no cure, but can still be managed. If you can make peace with that debt and are able to limit the damage to your monthly retirement budget, this may be your best bet.

Robin Hartill is a Certified Financial Planner and Senior Writer at Penny Hoarder. Send your sensitive money questions to

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