Question: I’m a US Army veteran, and I’ve been paying off the loans I took to send my kid to college, but the interest was heavy from day one. I’m 60 and don’t know if I can retire because I still owe $36,000 in student loans. My credit card debt is now $17,000—the balance was one-third of that, but it kept growing because my student parent loan payments were draining my estimated monthly credit card payments. I’m afraid to die with debt without a chance to retire. I’m tired and I’ve been working about 45 straight years. I live in a fist of hope, a potential reality that I will live until I give up trying to work out my loans affecting my physical and financial life. What should I do?
Answer: “I find many parents in this situation, so know that you are not alone,” says Pamela Rodriguez, a financial advisor at Integrated Partners. “I have had many conversations with parents and students about student loans being a huge black hole with no end in sight. Trying to get through the student loan system can be stressful both financially and emotionally,” Rodriguez says. The good news: There are options that can make loan repayments faster and/or easier for borrowers. This is what the professionals told us.
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In your case, the fact that you are a veteran may work in your favor, as there are a number of resources like these available to the military and veterans. “Veterans may be eligible for special programs that waive interest or may waive loan liability,” Rodriguez adds. Note that PLUS parent loans borrowed on behalf of the student may qualify, but private parent loans do not qualify for the tolerance. Also see other loan forgiveness options here.
You may be able to lower your monthly payments to make it more manageable. Although PLUS Parental Loans do not qualify directly for income-based repayment plans, if your PLUS Parental Loans enter repayment (the period in which the person begins repaying the loan) on or after July 1, 2006 and you consolidate it into a Federal Direct Consolidation Loan, The consolidation loan is eligible to repay potential income. “This monthly loan repayment is based on a percentage of the parent’s discretionary income rather than the amount they owe,” says Mark Kantrowitz, author of How to Appeal for More Financial Aid for College. After 25 years, the remaining balance can be forgiven. Although this may not help you pay off loans faster, it will reduce your monthly costs, which may help you pay off credit card debt faster. You can read the details here.
It may also be time to ask your child to help bear the burden of this debt. It’s worth looking for refinancing (see the lowest student loan refinancing rates you can qualify for here), Rodriguez says. “Parent loan PLUS can be transferred through student refinancing,” Rodriguez says. You can read more about the process here. “Unfortunately, when a parent’s PLUS loan is refinanced, the student loses access to federal payment options and is no longer eligible for the income conditional repayment,” she explains. Keep this in mind before refinancing.
Note that it may be best to try to pay off credit card debt before attempting to aggressively pay off PLUS parent loan debt, since the interest on credit card debt may be higher. “One can make the required payments on the PLUS parent loan debt and use all the remaining funds to pay off the credit card balance. Don’t do any additional fees on credit cards,” Kantrowitz says.
Although there have been talks about the president creating a new student loan forgiveness program, Kantrowitz says it will likely be limited in amount and eligibility. The cost of the $50,000 loan forgiveness would be more than $1 trillion and would wipe out the federal student loan debt of 80% of borrowers. Even the $10,000 loan forgiveness that would erase the federal student loan debt of a third of borrowers would cost $373 billion. If they limit the tolerance to only borrowers who owe $10,000 or less, the cost would be $75 billion. “It would be better to target economically distressed borrowers,” Kantrowitz says.
“The good news is that there are options available, but it may take a little work on the leg to see what’s available for your individual situation,” Rodriguez says.
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