Question: I am 55 years old and I am a psychotherapist. I have $197,000 in student loans for four degrees, plus Parent Plus loans for each of my adult children. By the time we were in school, we were barely getting by and some of the money was for living. The last time I spoke to the loan officer; they said my payment was $1900 per month. Most months my homecoming pay is $2,000; sometimes less.
I am applying for an income-contingent repayment, but I’m afraid I’ll never repay the loans. I have many health problems and I fear that my ability to repay loans will decrease. I also see that any reasonable payment will not even cover the interest. I still don’t have a retirement, savings or 401(k). As my health deteriorates further and I have to work fewer hours or not at all; what happens to the loans? The reality of the situation is that I probably have to send them my entire check now to have a chance to clear the debt. I’m also concerned about whether or not the debt will be discharged if I die. What should I do?
To respond: Having six figures in student loan debt may seem overwhelming, but the good news is that you’re already making a very smart decision: trying to follow an income-driven repayment plan. These plans are “available for all direct loans, including Parent PLUS loans,” says Anna Helhoski, student loan expert at NerdWallet. Depending on the repayment plan you apply for and qualify for, loans are forgiven after 20 or 25 years of payments, even if your monthly payment is $0 based on your income. In order to take advantage of one of the income-contingent repayment plans, you will need to consolidate your loans into one new direct loan. Helhoski recommends using this Federal Student Aid loan simulator to see how much you could pay under different plans. (Note that refinancing federal loans will deprive them of some of the benefits such as income-driven repayment plans; if however, one of your loans is a private loan, refinance rates are currently low – see lowest student loan refinance rates you could qualify for here—so a refi might be worth considering.)
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That said, it’s a lot of debt, so it might help to get a professional to take a look at it. The Institute of Student Loan Advisors (TISLA) offers free advice on student loans and the National Foundation for Credit Counseling (NFCC) helps with free debt management plans and student loan advice as well as reviews of credit reports and bankruptcy advice. “You need to work with someone familiar with the different forms of federal student and Parent Plus loans, as well as a qualified debt counselor,” says Lisa Weil, director and founding member of Clarity Northwest.
What about disability?
“You might consider eligibility for total and permanent disability release (TPD) if your medical issues ultimately prevent you from being able to work,” says Andrew Pentis, certified student loan counselor and student debt expert at Student Loan Hero. This requires a doctor to certify that a borrower is unable to engage in substantial gainful activity due to permanent disability; if this is correct, their federal student loan may be forgiven. “About half of private student loans offer similar disability release,” says Mark Kantrowitz, author of Who graduated from college? Who doesn’t? .
What happens to your student loan debt when you die?
While it’s not something borrowers want to think about, those with high debt, older age, or health issues might worry about what would happen if they still had student loans to spare. their death. “The somewhat comforting news is that your loved ones won’t have to pay federal student loan bills if you die, and parents won’t have to repay PLUS loans if the student the parent borrowed the loan for dies,” says Helhoski. If you die, your spouse will need to provide a copy of the death certificate for any remaining federal loans to be forgiven, Pentis says. Note that private loans work a little differently: a debt incurred for your own schooling will likely be paid off, but a private loan co-signed by a parent might not.
Questions edited for brevity and clarity.