I’ve been paying off my student loan for 37 years, but now I’m making $11,000 a year
Question: I have a 1984 student loan that I defaulted on. I am 72 years old and paid by deduction in my Supplemental Security Income (SSI) benefits. My annual income is only $11,000. It becomes difficult to decide whether to repay the loan or buy food and medicine. After 37 years, is there a way to cancel or waive this loan?
To respond: It’s undoubtedly painful to face decades of student loan repayments and feeling like you still haven’t made enough progress, but the pros say there are things you can do. The first thing to know is that your loan payments probably shouldn’t be deducted from your Social Security at this time. Indeed, the government stopped garnishing tax refunds or garnishing wages until six months after the payment suspension was lifted (now scheduled to lift on August 31). As such, Leslie Tayne, Founder and Managing Director of Tayne Law Group, said, “I would absolutely contact the duty officer and find out what’s going on.” (Note that while today’s low student loan refinance rates may be tempting, those with federal loans probably do. do not want to deny because it deprives you of federal protections; however, readers with private student loans may want to refinance – see the lowest student loan refi rates you could qualify for here.)
And there are other avenues you can take to better control your student debt, like enrolling in an income-based payment plan and pursuing a possible settlement.
Income-Based Repayment Plans for Federal Student Loans
“My optimistic assumption from reading their question is that this borrower is not currently in default on the loan,” says Andrew Pentis, Loan Expert and Certified Student Loan Advisor at StudentLoanHero. “That’s great because then they could still be eligible to enroll in one of four income-based reimbursements (IDR) plans designed to keep monthly expenses very low in relation to income. People with very low incomes can get payments as low as $0 on these plans, but note that you must have a federal loan to apply for IDR.
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Since this 1984 loan is older, the borrower may need to consolidate it with the federal government into a direct consolidation loan to claim the IDR, according to Pentis. “But it’s quite easy to undertake. It’s best to talk to your federal loan officer over the phone,” he says, adding that studentaid.gov is improving its website “but it’s still not foolproof.”
Look for a settlement
Borrowers with past federal or private student loans in default may consider trying to negotiate a student loan settlement. But you’re at the mercy of your lender, according to Anna Helhoski, student loan expert at NerdWallet.
“Federal student lenders will require your loans to be in or near default to enter settlement negotiations, but that’s not the kind of thing you should be trying to force,” she says. “There is no guarantee that your lender will negotiate and you will damage your credit and face other punitive consequences as a result.”
Typically, federal student loan settlements aren’t common because the loan holder can get your money through tax refund garnishment or wage garnishment, according to Helhoski. . “Private student loan settlements are also difficult to obtain,” she says.
She adds: ‘But you may be able to settle them if you are in financial difficulty, have defaulted more than once or if they cannot garnish wages or have your tax refunds garnished. This is a potentially extreme option for borrowers to pursue debt settlement, but it may be the only way to get rid of old overdue debt that is weighing them down.
Take stock of your endgame
“I wish I could press a button on a time machine to talk to this borrower 20 years ago and put him on the path to forgiveness,” says Pentis, who acknowledges that looking forward, and not backwards, is the key to building a better financial foundation. “For this borrower, a zero student loan balance isn’t their goal and probably isn’t a realistic option,” he says. “It’s about keeping their monthly dues under control, so they can afford everything they really need to live on.”