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I am 65 and stuck with student loan debt. What do I do?

by Jadranko Tomic-Bobas, Managing Hotline Attorney


Stack of booksOver the last decade, outstanding student loan debt has nearly tripled with the current total is $1.3 trillion. Households with a net worth of less than $8500 hold more than 60%. More than 3 million Americans ages 50-64 are in default on their student loans. According to data compiled by the Federal Reserve Bank of New York, “Americans 50 and older with student loan debt increased from 3 million in 2005 to 6.9 million in 2012 – an increase of 130 percent.”

Seniors are defaulting at higher rates than younger borrowers, according to the US government accountability office. Specifically, more than half of federal student loans held by borrowers age 75 or older are in default.

It is important to understand that student loan must be repaid even if you don’t complete your education, can’t find a job related to your program of study, or are unhappy with the education you received.

Some common reasons why people have student loan debt as they approach retirement age are because:

  • They went back to school late in their careers;
  • They cosigned loans for their children or grandchildren;
  • They took out a Parent PLUS loan;
  • They defaulted on student loans (often because of illness, divorce, or unemployment);
  • They chose to make small payments on loans over a long period of time (often because of a pay-as-you-earn repayment plan).

money-coinsFederal student loan debt and Social Security

The risk in having federal student loan debt when you retire is that:

  • The government can offset monthly federal benefits up to the lessor of 15% total benefits or the amount by which the benefit exceeds $750 per month; and
  • The IRS can offset any income tax refund that you may be entitled to until your student loans are paid in full.

Government loans don’t go away

Unlike other debts, there is no statute of limitations on collection of delinquent government student loan debt.

Get help and advice

If you are approaching retirement age, or are already retired, and have student debt that you are having trouble repaying, get advice from a reliable source:

  • Contact the Department of Education’s Ombudsman at 877-557-2575 or online;
  • The American Student Assistance program is a private, non-profit organization that gives borrowers information on repaying student loans and recovering from default. Contact them at
  • Another option is to hire a private attorney who specializes in student loan repayment. (It is important to hire an attorney who specializes in student debt because not all attorneys know the ins-and-outs of this complex area of law.)


Some seniors will consider bankruptcy as a viable option. However, unless you can prove “undue hardship,” student loans cannot be discharged in bankruptcy. Consult a bankruptcy attorney.

Student loan can be forgiven, canceled, or discharged.

Under specific circumstances your loans may be forgiven canceled, or discharged. Although the circumstances under which federal student loans can be cancelled are limited, a few circumstances do exist:

  • The death of the student-borrower;
  • The borrower is totally and permanently disabled and unable to perform any substantial gainful activity;
  • Discharge in bankruptcy;
  • If the loan is a Parent PLUS loan, the loan may be cancelled if the child for whom the loan was taken out dies or becomes totally and permanently disabled or the parent dies or becomes totally and permanently disabled;
  • The school the borrower attended closes or has serious credentialing problems; or
  • The borrower works full-time for either the government or a 501(c)(3) non-profit for 10 years and has made 120 payments on the loan.

Loan rehabilitation

Another option to deal with a defaulted student loan (in addition to loan cancellation and paying off the loan) is to rehabilitate your loan. The first step is to meet with the loan holder (or the collection agency) and agree on a reasonable and affordable payment amount. Usually that payment is about 15% of your disposable income. Next you must make nine on-time payments within a 10-month period.

If you make nine out of ten payments on time, your loan holder will try to sell your loan to a rehabilitation lender. If your loan is purchased by a rehabilitation lender, your loan will no longer be in default.

At this point, you will send your payments to the new loan servicer and work with them on a new payment plan. Rehabilitated loans are eligible for lower payment options such as income-based repayment and extended repayment.


A consolidation loan combines multiple loans into a single loan with one monthly payment and one fixed interest rate. If you get a consolidation loan, you will immediately be taken out of default status.

If you or a loved one have questions about student loans, please contact the Legal Hotline for Michigan Seniors at 800.347.5297 and our hotline attorneys will be happy to answer your questions.

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