Although student loans are usually associated with young people, about 23% of the $1.5 trillion total student loan debt in the United States is owed by people ages 50 and older — and many of these loans are in serious delinquency (90+ days late).1 Older Americans may be carrying loans for their own education, or they may have taken out or co-signed loans for their children or grandchildren.
The Coronavirus Aid, Relief, and Economic Security Act suspended federal student loan payments and interest through September 30, 2020. If you or a child carry a federal student loan and anticipate having difficulty restarting payments, an income-driven repayment plan could ease the burden.
Not Just for Young PeopleTotal student loan debt by age group, in billions
Source: Federal Reserve Bank of New York, 2020 (Q1 2020 data)
Payments You Can Afford
The federal government offers four income-driven plans: Pay As You Earn, Revised Pay As You Earn, Income-Based Repayment, and Income-Contingent Repayment. Eligibility and terms of these plans depend on the origination date of the loan and whether it was for undergraduate or graduate education. All four plans are open to borrowers with federal Direct Loans (subsidized or unsubsidized), Graduate PLUS Loans, and Consolidation Loans. Parent PLUS loans are eligible only for the Income Contingent Repayment plan and must be converted first to a Consolidation Loan.
The most favorable terms of these plans allow borrowers who meet income guidelines to pay 10% of their discretionary incomes toward their monthly payments, with any remaining debt forgiven after 20 years of timely payments. Some plans require payments equal to 15% or 20% of discretionary income and/or a repayment period of 25 years.
Calculation of "discretionary income" varies by plan and depends on total income and family size. Payments made under other plans, including the standard 10-year repayment plan, count toward the 20- or 25-year period. Keep in mind that a longer payment period will increase the amount of interest and could increase the total amount repaid. But income-based payment, along with loan forgiveness, might make the loan more manageable while enabling borrowers to meet other financial obligations.
Under any of these plans, borrowers in certain public-service jobs may be able to have their loans forgiven after 10 years under the federal Public Service Loan Forgiveness Program.