Paying student loans nearing retirement? Read this!

Author: Casey Ryback

Don't be discouraged when you have debt or need money

The government estimates that nearly twenty percent of all student loan debt is held by persons aged 50 and above. For a student actively working to pay off these loans life is challenging and he has the health and stamina to work his way out of debt, but this can't be said of persons who are on the verge of retirement; for them it's an uphill climb that will definitely impact the quality of his retired life.

Student loans are unlike many other kinds of debt

Student loans, especially the federally backed loans leave you no room to escape; you are asked to repay the entire overdue part of your loan with interest immediately. Default means that you may face any number of punitive actions ranging from withholding of tax refunds, garnishing of wages, and reduction of Social Security benefits. Government figures reveal that in 2012 more than 100,000 retirees suffered reduction of their social security benefits. Once default is apparent borrowers got notices to pay up failing which they were given an opportunity to work out a fresh repayment schedule, or to dispute the loan before their social security benefits were reduced.

Student loans are off the radar in bankruptcies

Bank loans, credit card balances and medical bills etc. can be discharged when you file a bankruptcy claim but the same privilege is not extended to federally backed and privately sanctioned education loans. Education loans can be discharged only under the rarest of circumstances such as the death of the borrower, his permanent disability or when it can be proved that the loan repayment stands between him and maintenance of a minimum standard of living.

Government supported income based repayment plans for defaulted student loans

The government gives the defaulting borrowers an opportunity to enroll in an income based repayment plan which is a practical way of surmounting the debt mountain.

In this scheme your entire income is not taken into consideration for determining your repaying ability. Your lower "discretionary income" is worked out by linking your existing income to the current poverty line. This is referred to as discretionary because it is assumed to be the surplus after meeting all your legitimate expenses necessary for survival. You are then required to make a regular monthly payment equivalent to 15% of your discretionary income. You continue paying your loan uninterruptedly for 25 years after which the government waives or forgives the loan balance remaining whatever that might be. So this plan involves a steady but lowered loan repayment and a debt forgiveness component after 25 years.

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A new "Pay as you earn" plan has now come into effect from December 2012 where discretionary income payments have been reduced to 10% and forgiveness is extended after 20 years of steady uninterrupted payments.

The whole idea is to keep up a steady if reduced repayment which is determined as a small percentage of one's surplus income, thereby arresting one's tendency to default. However, the plan does not cover loans that parents may have availed and private loans.

Loan consolidation for lowering repayments

Another solution is to extend the loan repayment schedule in such a manner that the heat is taken off your current monthly repayment. Extending the loan tenure means lower monthly installments which give you a much needed breather when you happen to be financially stressed. Obviously the flip side would be more interest payments in the future but this would be infinitely preferable to defaulting on the loan in the present and to face the legal complications that could ruin your life.

Other options that older borrowers can avail

The borrower who owns a home may be better placed to aggregate their student loan with their mortgage. The arrangement may entail paying additional higher interest but you could settle for the advantage of lowered monthly payments. Many borrowers are resorting to getting a home equity loan or an insurance loan to bail out their education loans but the interest payouts are higher and the loan repayments do not enjoy much flexibility. This why borrowing from one source to repay another loan has serious limitations.

Despite the entire hullabaloo about loan repayments gone wrong there are many parents and students that have managed to avoid the default tag. A major reason behind this is their insistence on mutual discussions within the family before taking on any loan liability. This is particularly so where parents had to co-sign loans for their children. These families were clear about not taking on more loans than they could comfortably repay. Students were also more hard headed and clear about the extent of risk they should take and the extent to which they should involve parents in their career choices. If it was felt that the career path was becoming too expensive for comfort both students and parents did not hesitate to search other career avenues.

Budgeting and expense cut backs are still worth their weight in gold

This is applicable in any stage of your life; budgeting your earnings and controlling expenses. If you finalize a clear cut budget for the month and restrain yourself from exceeding your budget under any circumstances, you will be effectively freeing hard cash that can be used profitably to fight debt among many other goals. In fact your endeavor should be to earmark a particular amount every month to feed your overdue loans. In case you come across a windfall the money should be used to repay the loan before it gets diverted to life's other needs.

Utilizing the pawn car title loan to tackle student debt

Previously, we talked about cutting expenses and shoring up your savings and adhering to a budget to tackle indebtedness. This may not be as easy as you think given the fact that your savings will come under tremendous pressure especially in emergencies. This is when you ought to be thinking on the lines of availing a loan for vehicle title.

Such loans are the best emergency funds that can be sourced from the money market. Pawn car title loans carry interest rates well below 25% APR, and they can be repaid in any tenure of your choice from three months to three years. The auto collateral loan can help you lay your hands on amounts in excess of 60% of the equity dormant in your car. This is money that will be useful in making bulk repayments at short notice, any amount that can help you save yourself from defaulting the student loan. The car equity loan does not insist on a great credit rating; whether good credit or bad credit you will have no difficulty accessing these loans, and the loans are delivered lightning fast.

Article Source: http://www.articlesbase.com/loans-articles/paying-student-loans-nearing-retirement-read-this-6656299.html

About the Author

Casey served as chef in Denver, Colorado until he was 32 years old where he relocated to Los Angeles,Ca with his wife and two children. He is currently getting his bachelor's in Business Administration.

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