Question: I’m about to turn 65 and eligible for Medicare. I have a bachelor’s degree in corporate and organizational communication and an associate’s degree in marketing and sales technology. I was 40 when I graduated. My younger classmates got great jobs. I went bankrupt and my house and cars were repossessed. All my dubious choices and ignorance have been watching me since 1997. I have paid back my loans sometimes – in fact most often – but I have defaulted several times. Many times I asked for forbearance from difficulties. My loans have all been consolidated and placed through several companies. I recently qualified for a $0 payout through income-based reimbursement. The accrued interest is more than double what I borrowed. COVID put me out of work. What can I do in this situation?
To respond: First, let’s look at what you do well, which is an income-driven repayment plan. When you have a patchy repayment history that includes defaults, forbearances, consolidations, and multiple repayment plans, your best option is to find a plan that will fit your life circumstances, says expert Anna Helhoski. in student loans at NerdWallet. “Income-contingent reimbursement is the best option when you have fluctuations in income.” (Note that these income-based repayment plans are generally only available for federal loans, so you probably don’t want to refinance, as doing so would rob you of that option. But for readers with private loans, however, a refinance might make sense as rates are low now — you can see the lowest fares you could qualify for here.)
“What you will need to do is recertify your income each time it changes. It can be a tedious and expensive process to do more than once a year, but it’s probably the best option to make sure you stay on track and out of trouble,” says Helhoski, of staying on a plan. income-based reimbursement. Under these repayment plans, any remaining balance is forfeited if your federal student loans are not fully repaid at the end of the plan, as long as you have made the minimum number of consecutive payments, either 20 years or 25 years over a income-based repayment plan, you’re in good shape. For those on very low incomes, payments can be as low as $0 per month and still count towards loan forgiveness.
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It looks like your student loans weren’t discharged when you filed for bankruptcy — getting them discharged is very difficult, the pros say — and doing so requires showing undue hardship in adversarial proceedings. “Undue hardship is generally interpreted to mean that you are currently unable to repay your student loans and maintain a minimum standard of living for yourself and your dependents, that this situation must be likely to persist for the major part of loan terms and that you’ve made a good faith effort to explore repayment options such as income-contingent repayment, deferrals, and forbearances,” says student loan expert Mark Kantrowitz, author of Who Graduates From College? Who doesn’t?
It is essential now that you have control over your finances. “It’s not an overnight process,” says Grace Yung, Certified Financial Planner at Midtown Financial. “In order to recover from bankruptcy and get out of debt and achieve financial freedom, [requires a] change your financial habits. The National Foundation for Credit Counseling and Clearpoint offer free or low-cost credit counseling services to help people with personal financial problems.
And you’ll want to find a job if you can. Depending on the state you are in, there are likely employment development programs that offer special services for older workers. RetirementJobs.com offers job postings for people over 50, and AARP has a job site aimed at helping older workers find work.
Hard work comes into play when you need to stay disciplined and implement new healthy habits. “It will have to become your new way of life so that you can stay financially fit,” Yung says.