Headed for Retirement with $345k in Student Loans
More and more people are headed for retirement with student loan debt. What can you do to protect your Social Security from garnishment?
Dear Steve,
I’ve been getting forbearances forever on this loan. I think it is a federal (not private) student loan. And now the balance is up over $345,000. I am 62 years old. At some point, I will no longer qualify for forbearance.
How can I avoid the nightmare of the government garnishing my Social Security payments to pay down this loan?
Douglas
Dear Douglas,
Let’s hope these are federal student loans. If they are private, you might be screwed.
For both federal and private student loans, the forbearance option is a reasonable short-term solution if you just need some breathing room to get over a quick hurdle. As a repayment option, it utterly and totally sucks.
When you are given the pleasure of not making a payment with forbearance, interest begins to accelerate and the unpaid balance grows faster and faster. It’s always interesting that many people select forbearance when they can’t afford their loan payments when it only makes the loan less affordable in the future.
You deserve a comfortable retirement.
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Like forbearance, the income driven repayment plans can grow your balances since the reduced payment you are making may be insufficient to pay the interest. You should read this to understand the downsides.
After 20 to 25 years in one of these programs, the remaining balance owed would be forgiven. This approach will prevent you from falling into collections, which could increase your balance due by 20% or so. It will also prevent you from going into default, which could lead to a tax refund intercept or an administrative wage garnishment of your Social Security.
I think you are just going to have to come to terms with the fact you may never repay this debt, but this strategy will also keep you out of trouble.
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Reviewed December 2021
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