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We often think of student loan debt as a young person’s problem, but it’s not confined to millennials alone. The Consumer Financial Protection Bureau (CFPB) reported that the number of consumers 60 and older with student loan debt in the U.S. has quadrupled over the last decade.
The cost of college is on the rise and student loan debt is rising with it. So it’s not a huge leap to assume that, for an increasing number of people, student loans will be part of retirement.
Is there a way to keep student loan payments from ruining your dreams? Here are some ideas for managing your student debt as you move into your golden years.
1. Manage your priorities
“As you plan to look at retirement, you may be paying back your own student loans [and] looking ahead to pay for a child’s college tuition,” said Joe DePaulo, the CEO and cofounder of College Ave Student Loans. “It’s important to get your priorities in check.”
Before you put money into a child’s college education, DePaulo suggested looking at your own situation. Get your retirement savings squared away first and make sure have your own student loan payments covered before you start looking into supporting your children.
That may sound harsh, but your children can borrow student loans, apply for scholarships, or earn grants to help them cover college costs. If you don’t save enough for your retirement, however, there are very few programs or options for you to turn to.
2. Factor student loans into your budget
Roger Whitney, CFP and host of the Retirement Answer Man podcast, agreed that it’s important to include student loan payments in the equation when considering retirement.
“If it’s a bill, you just have to figure it out,” Whitney said. “When you’re deciding on your monthly retirement needs, remember to include it, just like you would your utilities.”
That might mean cutting back on some of your other wants during retirement and living more frugally until that last student loan payment is made. It’s no fun to cut back, but sometimes it has to be done.
3. Refinance your student loans
One thing you might not have thought about is refinancing. “Would lower monthly payments work better for your situation?” asked DePaulo. “Could you qualify for a lower interest rate to help you pay off your loans faster?”
Refinancing to a lower interest rate and monthly payment can free up cash flow that allows you to better manage your money during retirement. A student loan refinancing calculator can help you figure out how much you can save each month, potentially adding up to thousands of extra dollars over the life of your loan.
Refinance before you retire, though. Once you no longer have dependable income from a job, you might find it harder to get approved for student loan refinancing.
There are plenty of lenders ready to help you refinance your student loans, as long as you meet their requirements. Plan now to make sure you’re eligible for refinancing before you retire.
4. Don’t forget Parent PLUS loans
Maybe it’s not your own student loan debt you’re worried about. Whitney said some consumers approaching retirement are paying down Parent PLUS loans they took out for their children’s education.
It’s possible to refinance a Parent PLUS loan so you have a lower interest rate and payment, too. However, Whitney suggested the student pay for it. “It’s their debt, it’s time to let them be responsible for it,” he said.
While you can get the loan refinanced in your child’s name to make it their sole responsibility, Whitney said that’s not always necessary. “Just as long as the student is paying for it, that’s a win.”
You can keep the loan in your name and ask your child to send in payments each month. However, you assume some risk in this situation. If your child misses any payments, your credit will be damaged — not theirs.
Refinancing can also be a good solution for loans you’ve cosigned on, as well. If you child has a reliable source of income and good credit, you might be able to remove your name from your child’s loan by refinancing it.
5. Realize that retirement isn’t all-or-nothing
According to Whitney, one key to managing student loan debt in retirement is realizing that it’s not all-or-nothing. “You’re not either working or not working,” he pointed out. “Sure, retire from the job you hate. But get a part-time job you enjoy and use that money to pay your student loans.”
Retirement doesn’t have to be about quitting all work, forgoing any income, and living off your savings. Instead, find work you’re passionate about that allows you to earn an income. Even if it’s half what you made at your career job, it can help you better manage your student loan payments.
“The important thing is to plan for it in your budget,” said Whitney. “There’s no reason you can’t retire even if you are still paying your student loans. You just have to be prepared to account for it in your budget.”
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
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|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|