Strategies for managing student loan debt after after age 50

Strategies for managing student loan debt after age 50

It’s become more common for middle-aged adults to carry student loan debt. Whether you owe money borrowed for your own education or your children’s, juggling student loan payments alongside other financial priorities can feel overwhelming. Many people focus on paying off student loans quickly — even if it means pushing pause on retirement savings — but that’s not always a good decision.

Prioritizing retirement savings

It can feel satisfying to eliminate debt. But if you’re in your 50s, for example, it’s important to make retirement savings a priority. Every dollar you don’t currently contribute to a 401(k) plan or an IRA loses years of potential growth. Aggressively paying down loans while neglecting retirement savings may, in some cases, leave you debt-free but unprepared for retirement.

Instead, you may want to consider contributing enough to your work-based retirement plan to receive an employer match, if appropriate for your situation. That’s free money you don’t want to leave behind. At the same time, keep up with minimum payments required by your student loan servicer. Defaulting on student loans can lead to bad credit and other serious consequences.

Consider repayment options

If your student loans are federal, you may qualify for income-associated repayment plans. These plans can lower your monthly obligation, freeing up cash for other goals, such as saving for retirement.

In some cases, refinancing may make sense if it would significantly reduce your interest rate. Just know that refinancing government debt into a new private loan generally removes federal safety nets that protect borrowers who become unemployed or who might be eligible for forgiveness programs.

Weigh all priorities

In addition, your financial well-being (or at least your peace of mind) depends on having emergency savings, health insurance and, if you’re married or have minor children, life insurance. Budgeting for all of these needs can be hard, so consider prioritizing obligations in the following order:

• Cover the essentials. Maintain an emergency fund of three to six months’ expenses and obtain health insurance through your employer or the government’s Marketplace.
• Save for retirement. Prioritize contributions eligible for an employer match and increase your contribution rate as you receive raises and pay off debt.
• Manage high-interest loans. In many cases, it may make sense to prioritize paying off high-interest debt (such as credit cards) before lower-interest debt, depending on your circumstances.
• Manage student loans strategically. If necessary, look into repayment plans or refinancing.

Strike a balance

To help keep student loans from derailing your retirement plans, consider striking a balance between debt repayment and saving. Contact a financial professional for additional advice.

Important Disclosures

Investment advisory services offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

The views expressed are current as of the date of publication and are subject to change without notice. The strategies and concepts discussed are provided for informational purposes only and may not be suitable for all individuals. This material is not intended as specific investment, tax, legal, or financial planning advice. Individuals should consult their tax and legal professionals regarding their specific circumstances.

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