The Moneyist: ‘The weight of this debt is crushing’: I’m 74, and a retired speech-language pathologist with a student-loan debt of $200K. Am I obliged to pay it off?

I’m sure there are more people in a situation similar to mine.

Looking for a Solution

Dear Looking,

Social Security can garnish up to 15% of retirement and disability benefits, but it cannot garnish your Supplemental Security Income, nor can it leave you with less than $750 in monthly benefits.

The average amount of student-loan debt in households headed by a person age 50 or older hovers at $36,421, according to the Federal Reserve Survey of Consumer Finances. They accounted for 22% of student debt, totaling $336.1 billion.

As the AARP states: “Student loan debt was never meant to last a lifetime or become a threat to retirement security. Yet today, borrowers frequently wind up carrying it into retirement, long beyond their working years.”

The student-loan debt is discharged if the borrower dies or if you become totally and permanently disabled, says Mark Kantrowitz, the author of “How to Appeal for More College Financial Aid” and “Who Graduates from College? Who Doesn’t?” 

“A senior citizen can qualify for a total and permanent disability discharge if a doctor is willing to certify that the borrower is unable to engage in substantial gainful activity due to a physical or mental disability,” he says.

The fact that you are in an income-driven payment plan will help keep the repayments low, as the money you pay is based on your income and not on how much money you owe. That’s something to hold on to. Stick with that.

If your income is less than 150% of the poverty line, the loan payment is zero, Kantrowitz adds. If your sole source of income is Social Security, your student-loan payments might actually be very low, even if the amount owed is high.

“Income-driven repayment plans can be negatively amortized, meaning that the payment is less than the interest that accrues. Deferments and forbearances can also be negatively amortized,” Kantrowitz says.

There are other options for older borrowers who are shouldering student loans, he adds. The economic hardship deferment, unemployment deferment and general forbearances are each available for up to 3 years, for a total of 9 years.

“If a borrower consolidates the loans after the deferments and forbearances are exhausted, the consolidation loan will be eligible for its own set of deferments and forbearances, as it is a new loan,” he says. “That gets the borrower another 9 years.”

“Income-driven repayment plans can be negatively amortized, meaning that the payment is less than the interest that accrues,” Kantrowitz says. “Deferments and forbearances can also be negatively amortized.”

Depending on the type of income-based repayment plan you’re on, you may also be able to have the outstanding balance on your loan forgiven after 25 years in most cases.

The Public Service Loan Forgiveness program is an option for others struggling with student debt. You work in public service for 10 years, pay your student loans during that time and have the balance canceled at the end of that period. 

This may not be the exact answer you were hoping or praying for, but looking at the overall picture may provide you with some relief, given that you are probably unlikely to repay the $200,000 during your lifetime.

You can email The Moneyist with any financial and ethical questions related to coronavirus at [email protected], and follow Quentin Fottrell on Twitter.

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