It’s easy to think of student loans as a problem for young people. But the reality is that a considerable number of older Americans, including retirees, are juggling student loans. Because they are still paying back their education or have received a loan to help fund their children and grandchildren’s education.
As of August 2022, approximately 6% of Americans over 50 have student debt. This is equivalent to approximately 7.2 million people in this age group.
Meanwhile, as of 2022, the Federal Reserve reported an average student loan balance of Americans aged 55 to 64 at close to $62,000. For people ages 65 to 74, the average balance was around $58,000.
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Student loans can be burdensome and can also hinder your financial goals, such as retirement savings. And while it is clear that many people will retire student debt, that is not ideal.
Many retirees are limited to bonds from social security and modest withdrawals from IRAs or 401(k) accounts. Worried about paying student loans at that stage in life can make managing your money even more stressful. So, if you’re balanced by age 50 or older, it’s important to be strategic with student loans.
According to the Associated Press, one of the good news is that the Trump administration has suspended plans to get Social Security checks for borrowers who are defaulting on student loans. It could alleviate one of the sources of stress among older people with bonds. But it doesn’t address the overall issue of having to adjust these loans and other bills. So, if you’re balanced by age 50 or older, it’s important to be strategic with student loans.
Don’t stop savings for retirement
If you’re still hooking for student loans and you’re nearing the end of your career, you may be prone to pour all your spare money into those loans and knocking them out before you retire. It’s an understandable idea, but if it means ignoring eggs in your nest, it may not be the best way to go.
“We are pleased to announce that Domenick D’Andrea, co-founder/finance advisor at Dandarah Wealth Management,” said: “People over 50 don’t have much opportunity in the workforce with guaranteed pensions. So they have to plan for themselves through various retirement savings accounts, such as 401(k) and Iraq, to ​​save goals like retirement.”
That said, suspending retirement plan contributions could mean waive any favorable tax credits as traditional 401(k) and traditional IRAs are funded in pre-tax dollars. If your employer offers a 401(k) match, you may also leave free money on the table. And of course, stopping your retirement plan contributions risks you running short on savings once your career is over.
Rather than putting retirement plan contributions on the backburner with a focus on student loan repayments, D’Andrea says older borrowers need to know what their monthly budget looks like and see if there is a way to cut costs.
That said, some employers may offer student loan matches instead of traditional 401(k) matches. If your workplace offers this advantage, it may be that you want to look into it.
One of the benefits older borrowers have is the fairness of a significant amount of home. And borrowers over 50 may have reached the point where their children are growing up and moving.
Downsizing from more expensive homes could free up the fairness that can be used to pay off student loan balances faster. Also, if you have limited stocks, reducing housing costs will make it easier for students to take preempt from debt and find funds to fund your 401(k) or IRA.
Check if you pay to refinance your student’s debt
If you can’t cut costs or help to minimize your student loan repayments more quickly while saving for retirement, D’Andrea recommends considering refinancing. This makes especially sense when you personally borrow.
If you are still carrying federal student loans, refinancing them may not be pointless. Not only do federal lending tend to offer competitive interest rates, it also has a variety of protections that private loans are not guaranteed to offer.
Joseph Patrick Loop, president of Belmont Capital Advisors, suggests using these protections for your benefit.
“In some cases, refinancing can help ease the monthly burden. In particular, a federal government loan, an income-driven repayment plan, or even a loan waiver program, or even a loan waiver program, may make sense for people in their 50s or 60s,” he says.
The important thing is to make a plan
It is natural to get off yourself later to carry student loan debt. But Roop claims you shouldn’t
“Don’t be embarrassed to have student loan debt in your 50s, 60s or retirement years, as it’s more common than most people notice,” he says. “Many people have come back to take loans to help their kids through school or to get their own degrees. There’s no shame, but there’s a need for a plan.”
Even if you think you can pay off your student loan before you retire, you have options. These include working part-time as a retiree or making a slightly longer life style change for retirement (which could include relocations to increase income).
“In the end, it’s not just about getting rid of the loan,” Roop says. “It’s about putting together a plan that includes debt, Social Security, retirement income and taxes. Student loan debt can make you feel comfortable leaving, but you need clear planning and proper guidance.”
