Over 50 and Still Paying Student Loans? Here's Some Help
It's the club no one wants to join. But if you are over 50 and still paying student loans, there are ways to tackle both debt and retirement savings.
It’s easy to think of student loans as a young person’s problem. But the reality is that a good number of older Americans, including near-retirees, are juggling student loans, either because they’re still paying off their own education or they took out loans to help finance a child or grandchild’s education.
The Urban Institute reports that as of August 2022, about 6% of Americans ages 50 and over had student debt. That amounts to roughly 7.2 million in this age group.
Meanwhile, as of 2022, the Federal Reserve reported an average student loan balance among Americans aged 55 to 64 at nearly $62,000. For those between the ages of 65 and 74, the average balance was about $58,000.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Not only can student loans be burdensome, but they can also hinder achieving financial goals, such as retirement savings. And while it’s clear that plenty of people carry student debt with them into retirement, that’s not ideal.
Many retirees are limited to a fixed income from Social Security and modest withdrawals from IRA or 401(k) accounts. Having to worry about student loan payments at that stage of life can make money management more stressful. That’s why it’s important to be strategic with your student loans if you’re over 50 and still carrying a balance.
One piece of good news is that the Trump administration has paused plans to garnish the Social Security checks of borrowers who are in default on their student loans, according to AP News. That potentially alleviates one source of stress for older adults on a fixed income. But it doesn't address the overall problem of needing to juggle those loans and other bills. That’s why it’s important to be strategic with your student loans if you’re over 50 and still carrying a balance.
Don't stop saving for retirement
If you’re still on the hook for student loans and you’re creeping closer to the end of your career, you may be inclined to funnel all of your spare money into those loans to knock them out ahead of retirement. It’s an understandable line of thinking, but it may not be the best way to go if it means neglecting your nest egg.
Domenick D’Andrea, Co-Founder/Financial Advisor at DanDarah Wealth Management, says, “People over 50 don’t have as many opportunities in the workforce with guaranteed pensions, so they must do planning on their own through a variety of retirement savings accounts like 401(k)s or IRAs. With a large percentage of this age group having to repay student loans, where the payments are a considerable portion of their monthly expenses, it is becoming harder and harder to save for goals like retirement.”
That said, pausing retirement plan contributions could mean giving up a lucrative tax break, since traditional 401(k)s and traditional IRAs are funded with pre-tax dollars. There’s also the possibility of leaving free money on the table if your employer offers a 401(k) match. And of course, there’s the danger that halting retirement plan contributions will leave you short on savings once your career ends.
Rather than put retirement plan contributions on the back burner to focus on student loan repayment, D’Andrea says older borrowers should figure out what their monthly budgets look like and see if there are ways to cut back on expenses.
That said, some employers may offer a student loan match in lieu of a traditional 401(k) match. If your workplace offers this benefit, it’s one you may want to look into.
One advantage older borrowers may have is a fair amount of equity in their homes. And borrowers 50 and over may be reaching the point where their children are growing up and moving out.
Downsizing out of a more expensive home could free up equity that can be used to repay student loan balances sooner. And if there’s limited equity, reducing your housing costs could make it easier to get ahead of your student debt while also finding the money to fund your 401(k) or IRA.
See if it pays to refinance your student debt
If you can’t cut back on expenses, or if doing so only minimally helps you repay your student loans more quickly while saving for retirement, then D’Andrea suggests looking into refinancing. This especially makes sense when you borrowed privately.
If you’re still carrying federal student loans, it may not make sense to refinance them. Not only do federal loans tend to offer competitive interest rates, but they also come with different protections that private loans are not guaranteed to offer.
Joseph Patrick Roop, President at Belmont Capital Advisors, suggests using these protections to your advantage.
“In some cases, refinancing can help ease the monthly burden. For others, especially those with federal loans, income-driven repayment plans or even loan forgiveness programs might make sense, even for folks in their 50s or 60s,” he says.
The key is to have a plan
It’s natural to get down on yourself for carrying student loan debt later in life. But Roop insists that you shouldn’t
“Do not be ashamed that you have student loan debt into your 50s, 60s, or even retirement years, as it is more common than most people realize,” he says. “Many folks took on loans to help their kids through school or went back to finish their own degree. There’s no shame in it, but there does need to be a plan.”
If it doesn’t seem like you’ll be able to pay off your student loans ahead of retirement, you still have options. Those could include working a bit longer, working part-time as a retiree, or making lifestyle changes in retirement (which could include relocating to stretch your income).
“Ultimately, it’s not just about getting rid of the loan,” says Roop. “It’s about putting together a plan that includes your debt, Social Security, retirement income, and taxes. You can still retire comfortably with student loan debt, but it takes a clear plan and the right guidance.”
Read More
-
Your 5-Step Guide to Discovering Whether a Lawyer Is ShadyResearch shows you can't rely on some state bar websites to vet a lawyer you're considering hiring. Here's how to check out a lawyer before you hire.
-
Steps to Keep Your Student Focused on College, Not FinancesToo many students drop out due to financial strain. This plan can help families plan for the costs and get timely aid that sees students through to graduation.
-
How to be the Chief Vision Officer of Your Advisory PracticeThe key is to transition from a tactical "doer" to a strategic "chief vision officer" by building the teams, processes and brand so your practice can grow.
-
Beyond the Bar: Your 5-Step Guide to Discovering Whether a Lawyer Is Shady
Research shows you can't rely on some state bar websites to vet a lawyer you're considering hiring. Here's how to check out a lawyer before you hire.
-
6 Practical Steps to Help Keep Your Student Focused on College Rather Than the Financial Strain
Too many students drop out due to financial strain. This plan can help families plan for the costs and get timely aid that sees students through to graduation.
-
Are You the Doer or the Visionary of Your Advisory Practice? Here's How You Can Make the Leap to Chief Vision Officer
The key is to transition from a tactical "doer" to a strategic "chief vision officer" by building the teams, processes and brand so your practice can grow.
-
How to Plan a (Successful) Family ReunionFrom shaping the guest list to building the budget, here's how to design a successful and memorable family reunion.
-
You've Heard It Before, But This Investment Advice Still Pays Off"Time in the market beats timing the market" ¬— been there, done that, right? But don't write off the underlying advice. There's a reason it's a popular saying.
-
6 Champagne Problems Successful Retirees FaceWhat do you do if your biggest financial threat is simply having too much of a good thing — money?
-
A Portfolio Checklist If You're Planning to Retire in 2027Are you planning to retire in 2027? This portfolio checklist will help put you on the right path.
-
How to Avoid Being Buried by the Tax Avalanche in Retirement: Tips From a Wealth AdviserAll that cash you have in tax-deferred accounts could launch you into a higher tax bracket when you start withdrawals. It's time to protect your income.
