5 Ways to Keep Student Loans from Ruining Your Retirement

student loan payments in retirement

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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