On an income-based repayment plan for student loans, some borrowers may have payments that are $0.
Question: I’m 66 years old and retired and have $70,000 in student loan debt. I’m currently on an income-driven repayment plan but my loans are being moved to a different loan servicing agency. My loan payments have been $0 a month because my Social Security is too low to warrant payments. Is there a way to have this debt canceled? I don’t expect l will live long enough to repay these loans.
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Answer: This query “cuts to the heart” of why senior citizens are asking the Biden administration “What about us?” regarding student loan relief, says Andrew Pentis, loans expert and certified student loan counselor at StudentLoanHero. The administration has “been really great about targeted student loan forgiveness programs” for groups such as veterans and disabled individuals, he adds, but for older borrowers, not so much. That said, pros have some suggestions for you.
In your specific case, student loan experts agree on a number of fronts about this situation: a) There’s no magic bullet to cancel the debt; b) awareness of the recent reshuffling of loan servicers exiting and entering the industry is laudable – some borrowers aren’t as on top of things; and c) staying on the current course of income-based repayment is a good plan based on the facts you’ve provided.
While your debt-to-income ratio may put the kibosh on securing additional credit, the upside is that you are on an income driven repayment plan to keep the monthly bill low. There are four income driven repayment plans, and they’re designed to maintain affordable monthly payments relative to income.
As payments are made – in your case, $0, but it could be another amount in other situations – for 20 or 25 years, depending on which of the four IDR plans you are enrolled in, the leftover balance will be forgiven.
Income in your case is unlikely to change since the source is your Social Security benefit, and monthly payments should also remain static. As long as you keep making the $0 monthly payment your credit score should only go up. The loan is going to remain current, and you don’t have to worry about missing a payment and the negative consequences of delinquency.
There is a possible caveat. There has historically been income tax imposed on forgiven student loan debt, but Congress recently made forgiveness tax-free through 2025 on the federal level. Assuming that’s not extended and you receive relief for the loan after that date, you could have a large tax bill on your hands.
Note though, that programs change – and change again. “There is always a possibility that loan forgiveness might no longer be considered taxable income under income driven repayment,” says Anna Helhoski, student loan expert at NerdWallet. Given your limited income, you could likely enter into some kind of repayment agreement with the IRS.
It’s also important to note that, according to Leslie Tayne, founder and managing director of Tayne Law Group, bankruptcy is likely not a choice here because it doesn’t appear that a physical disability is making work impossible.
As you maintain your current repayment strategy, consider these housekeeping chores. Contact your new federal loan servicer to confirm that your account is in order and that “there’s been no hiccups in the transfer,” says Pentis. Ensure that you’re still qualifying for your IDR plan and are up to date, and check to be sure you’re being credited for your $0 payments (annualcreditreport.com) since mistakes happen.
Regarding your final point of your life expectancy: Fiscal sages are in sync about mortality and liability. If you’re the primary borrower of a federal student loan and you pass away, then the debt would be discharged.