How To End Student Loan Repayments – In Retirement
There is nothing good to take student loan retirement payments. It just stinks.
Since interest accrues on these debts, some people will owe more than what they borrowed on half or two-thirds of the loans, depending on Boston College Retirement Research Center (CRRC). Many of these debts will never be repaid.
When it comes to government guaranteed loans, the good news is that there are a myriad of repayment plans it can save you money. the The US Department of Education has a tool this will help you determine which plans are right for you.
While there are a handful of pauses on loan repayments due to the COVID pandemic, they won’t last forever. Now is the time to plan when your payments will end.
“The good news,” notes the CRRC, “is that under federal repayment plans, any unpaid debt will be extinguished in 20 or 25 years, depending on the specific terms of the plan. (Under a standard plan, the payback window is 10 years.) ”
“But loan forgiveness in repayment plans has a catch. Once the debt is canceled, borrowers are still required to pay federal taxes on their outstanding balances, which can add thousands of dollars to their income in a single tax year. To pay off this “tax bomb”, people often save money in a separate account for years, while paying off their loans. “
At the very least, see what you can do to put some extra money into your payments while exploring repayment options. This will make your retirement a bit easier.