I’m Headed for Retirement, Owe $345K on Student Loans I Can’t Afford, and I’m Afraid – Douglas


Dear Steve,

I’ve been getting forbearances forever on this loan. I think it is a federal (not private) student loan. And now the balance is up over $345,000. I am 62 years old. At some point I will no longer qualify for a forbearance.

How can I avoid my nightmare: the government garnishes my Social Security payments to pay down this loan?



Dear Douglas,

Let’s hope these are federal student loans. If they are private you might be screwed.

For both federal and private student loans the forbearance option is a reasonable short-term solution if you just need some breathing room to get over a quick hurdle. As a repayment option, it utterly and totally sucks.

When you are given the pleasure of not making a payment with forbearance, interest begins to accelerate and the unpaid balance grows faster and faster. It’s always interesting that many people select forbearance when they can’t afford their loan payments yet it only make the loan less affordable in the future.

At this point the first option would be to look at putting your federal loans into a new Direct Consolidation Loan and then opting for an income driven repayment plan. This would give you a monthly payment based on your income. And when you move into retirement or a lower income, then your payment would go down as well.

Like forbearance, the income driven repayment plans can grow your balances since the reduced payment you are making may be insufficient to pay the interest. You should read this to understand the downsides.

After 20-25 years in one of these programs, the remaining balance owed would be forgiven. This approach will prevent you from falling into collections which could increase your balance due by 20% or so. It will also prevent you from going into default which could lead to a tax refund intercept or an Administrative Wage Garnishment of your Social Security.

I think you are just going to have to come to terms with the fact you may never repay this debt but this strategy will also keep you out of trouble.

If you want to easily confirm if these are federal student loans you can login to the National Student Loan Data System and verify your loans are listed there. Only federal loans are listed in this database.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.