Question: I am a veteran of the United States Army and paid off the loans I took to send my child to college, but the interest was overwhelming from day one. I am 60 years old and I do not know if I will be able to retire because I still owe my parents $ 36,000 in student loans. My credit card debt is now $ 17,000 – the balance was a third of that, but it has continued to rise because parents’ student loan payments have eaten up my monthly discretionary funds for card payments credit. I am afraid that I will die in debt with no chance of retiring. I am tired and have worked for about 45 years in a row. I live in the grip of hope and the possible reality that I will live until I give up trying to repay my loans that are affecting my physical and financial life. What should I do?
Responnse: âI find many parents in this situation, so know that you are not alone,â says Pamela Rodriguez, financial advisor at Integrated Partners. âI have had many conversations with parents and students that student loans are a big black hole with no end in sight. Trying to navigate the student loan system can be financially and emotionally draining, âsays Rodriguez. The good news: There are options that can make loan repayments faster and / or easier for borrowers, including options like loan cancellation, income-tested repayment options, and loan refinancing.
In your case, being a veteran may work in your favor as there are a number of resources out there like those available to the military and veterans. âVeterans may be eligible for special programs that waive interest or possibly loan liability,â Rodriguez adds. Note that parent PLUS loans borrowed on behalf of a student may be eligible, but private parent loans are not eligible for remission. Also consider other loan forgiveness options here.
You may be able to reduce your monthly payments to make them more manageable. Although parent PLUS loans are not directly eligible for income-tested repayment plans, if your parent PLUS loans came into repayment (the period in which the loan begins to be repaid) on or after July 1, 2006 and you consolidate it into a federal direct consolidation loan, the consolidation loan is eligible for income-based repayment. “This bases the monthly loan payment on a percentage of the parent’s discretionary income as opposed to the amount they owe,” says Mark Kantrowitz, author of “How to Appeal for More College Financial Aid.” After 25 years, the remaining balance can be canceled. While this won’t help you pay off loans faster, it will lower your monthly costs, which could help you pay off that credit card debt faster. You can read the details here.
It might also be time to ask your child to help you shoulder the burden of this debt. Rodriguez says it’s worth looking for refinancing (see the lowest student loan refinance rates you may qualify for here). âA parent PLUS loan can be rolled over to the student by refinancing,â says Rodriguez. You can learn more about the process here. âUnfortunately, when a parent PLUS loan is refinanced, the student loses access to federal repayment options and is no longer eligible for income-tested repayment,â she explains. Consider this before you refinance.
Note that it may be best to try and pay off credit card debt before trying to aggressively pay off parent PLUS loan debt, as interest on credit card debt may be higher. âWe would make the required payments on the parent PLUS loan debt and use any remaining money to pay off the credit card balance. Stop charging credit cards, âsays Kantrowitz.
While there has been talk of the president creating a new student loan cancellation program, Kantrowitz says its amount and eligibility will likely be limited. âThe cost of a $ 50,000 forgiveness would rise to over $ 1,000 billion and wipe out the federal student loan debt of 80% of borrowers. Even $ 10,000 of loan cancellation, which would wipe out the federal debt of a third of borrowers, would cost $ 373 billion. If they limit the remittance to only borrowers who owe $ 10,000 or less, the cost would be $ 75 billion. It would be better targeted to borrowers in economic difficulty, âsays Kantrowitz.
âThe good news is that there are options,â Rodriguez explains, âbut they may take a bit of work to find out what’s available for your individual situation.â
* Questions edited for clarity and brevity.