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Question: I’m a U.S. Army veteran, and I’ve been paying the loans I took out to send my child to college, but the interest was crushing from day one. I’m 60 and I don’t know if I can retire because I still owe $36,000 in parent student loans. My credit card debt is now $17,000 — the balance was one 1/3 of that, but it kept growing because the parent student loan payments chewed up my monthly discretionary funds for credit card payments. I fear I will die with the debts without a chance of retirement. I’m tired and I’ve been working about 45 straight years. I’m living in a stranglehold of hope, and the possible reality that I will live until I drop trying to work off my loans that are affecting my physical and financial life. What should I do?
Answer: “I find many parents in this situation, so know you’re not alone,” says Pamela Rodriguez, a financial adviser at Integrated Partners. “I’ve had many conversations with parents and students about student loans being a large black hole with no end in sight. It can be financially and emotionally exhausting trying to navigate the student loan system,” says Rodriguez. The good news: There are options that can make it quicker and/or easier for borrowers to repay loans, including options like loan forgiveness, income-based repayment options and loan refinancing.
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In your case, the fact that you’re 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 forgive interest or possibly forgive loan liability,” adds Rodriguez. Note that parent PLUS loans borrowed on behalf of a student may be eligible, but private parent loans are not eligible for forgiveness. Also look into other loan forgiveness options here.
You may be able to get your monthly payments lowered to make them more manageable. Although parent PLUS loans are not directly eligible for income-driven repayment plans, if your parent PLUS loans entered repayment (the period in which one starts repaying the loan) on or after July 1, 2006 and you consolidate it into a federal direct consolidation loan, the consolidation loan is eligible for income-contingent 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 may be forgiven. Though this might not help you repay the loans faster, it will make your monthly costs lower, which might help you more quickly pay down that credit card debt. You can read details here.
It may also be time to ask your child to help shoulder the burden of this debt. Rodriguez says it’s worth researching refinancing (see the lowest student loan refi rates you can qualify for here). “A parent PLUS loan can be transferred through refinancing to the student,” says Rodriguez. You can read more about the process here. “Unfortunately, when a parent PLUS loan is refinanced, the student loses access to the federal repayment options and they’re no longer eligible for income-contingent repayment,” she explains. Consider that before you refinance.
Note that it may be best to try to pay off the credit card debt before trying to aggressively pay down the parent PLUS loan debt, since the interest on the credit card debt may be higher. “One would make required payments on the parent PLUS loan debt and use all the remaining money to pay down the credit card balance. Do not make any more charges to the credit cards,” says Kantrowitz.
Though there have been talks of the president creating a new student loan forgiveness program, Kantrowitz says it’s likely to be limited in amount and eligibility. “The cost of $50,000 in loan forgiveness would be more than $1 trillion dollars and would erase the federal student loan debt of 80% of borrowers. Even $10,000 in loan forgiveness which would erase the federal student loan debt of a third of borrowers would cost $373 billion. If they limit the forgiveness to just borrowers who owe $10,000 or less, the cost would be $75 billion. It would be better targeted at borrowers who are experiencing economic distress,” says Kantrowitz.
“The good news is that there are options out there,” says Rodriguez, “but they may require a little leg work to find out what is available for your individual situation.”
*Questions edited for clarity and brevity.
