Question: I work as a nurse for a small for-profit agency. I am an employee and I do not have the possibility of working overtime. I only have every other weekend where I could work overtime. I have serious medical issues with huge medical bills on top of that. I have $13,000 in credit card debt, over $100,000 in student loan debt, I owe about $40,000 on my home loan, and I have a car payment. I am 62 years old and my full retirement age is 67. I have very little retirement savings. My student loan payment is over $700 per month on an income-driven repayment plan. When it resumes in August, I will have a budget deficit of $200/month! What can I do? When do you think I should retire regarding the student loan?
To respond: You’re already doing some things right, like signing up for an income-driven repayment plan to help manage your debts. But here’s the catch: “Since you work for a for-profit agency, you are not eligible for Public Service Loan Cancellation (PSLF), which is unfortunate because your loans would be canceled after 120 eligible payments if you had worked full-time for a government or non-profit organization while repaying the loans under an income-based repayment plan under the Direct Lending Program,” says Mark Kantrowitz, author of Who graduated from college? Who doesn’t?.
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You can also try asking your employer for a raise or bonus. “Your loan payments will increase as your income increases, but your income could increase enough to cover your budget shortfall. Nurses are in demand, so your employer might be willing to pay more to keep you on as an employee. Mention your high student debt as the reason you need a raise,” says Kantrowitz.
If you can’t pay off all your debt, Anna Helhoski, student loan expert at NerdWallet, advises you to contact your lenders or service providers to see what options are available to you. “If your discretionary income has changed, you may qualify for a lower student loan repayment,” says Helhoski.
Note that because your loans are federal and you are on an income-based repayment plan, you will not do not want to refinance your loans. For readers with private loans with higher interest rates, however, here are the lowest student loan refinance rates you could qualify for.
Retirement savings and student loan debt
One thing to consider about an income-based repayment plan with no retirement savings is this: “If you reach retirement age with no retirement savings, you will depend on Social Security for your living expenses. Loan repayment under an income-based repayment plan is zero if your income is below 150% of the poverty line,” Kantrowitz explains. It is therefore possible that you will have a much lower student loan repayment when you retire. Surprisingly, a student loan payment calculated from zero under an income-based repayment plan counts as a repayment and after a total of 240 (20 years) or 300 (25 years) payments, depending on the type of plan repayment based on income, the remaining debt can be forgiven.
Another thing to consider is that raising the retirement age will increase the amount you receive from Social Security each month, which could help you better manage your debts. That said, sometimes you don’t have a choice when to retire, as health can get in the way.
Deal with other debts
Because you have a variety of debts, Andrew Pentis, Certified Student Loan Counselor and Student Debt Expert at Student Loan Hero, says he recommends seeing no-cost or low-cost credit counseling at a counseling agency. in nonprofit credit like the National Foundation for Credit Counseling. or InCharge. “They can review with you the option of a debt management plan, which would organize your various outstanding balances and potentially lower your payments while working toward debt-free income,” says Pentis.
It’s also essential that you strive to make more money or spend less, or both, says Tatiana Tsoir, CPA and author of Dream bold, start smart. “Having a side concert, even if it’s rare and outside of opening hours, could be an opportunity to increase your income,” says Tsoir. Another thing you can try to do, according to Tsoir, is negotiate with your credit card companies to reduce your debt. “If you can improve your cash flow, you can try to aggressively pay down credit card debt without increasing the balance again. This could free up a few hundred dollars that you can save for retirement, and as you repay other debts, your savings can grow,” says Kantrowitz.
Creating a descriptive budget to track where your money goes each month is also something to consider. Kantrowitz recommends keeping receipts for each expense and recording them in a spreadsheet where you mark each expense as mandatory or discretionary. “Also assign them to broad categories such as food, entertainment, housing, taxes and insurance. At the end of each month, add up the categories and tags and it will show you where you are spending your money,” says Kantrowitz.
And Bobby Matson, founder and CEO of Payitoff, a fintech company that enables financial institutions to offer student loan refinancing and restructuring plans, says you might want to consider ditching your car and use public transport, or to see if you are eligible for free or reduced fare public transport depending on your medical conditions. “Some or all of your medical debt may be negotiated for a lower amount and likewise you can likely negotiate a lower repayment amount for your credit card or refinance the balance for a significantly lower interest rate,” says Matson.