The repayment of student loans can be a huge challenge. Living on social security can be a huge challenge. Living on social security AND repaying student loans might appear to be impossible.
Fortunately, borrowers can do both.
The key to success is to utilize programs like income-driven repayment plans and student loan forgiveness. These programs can provide excellent assistance to borrowers on social security. Many social security beneficiaries can eliminate all future student loan payments.
Income-Driven Repayment Plans for Federal Student Loan Borrowers on Social Security
At first glance, Income-Driven Repayment (IDR) might appear confusing.
The list of IDR plans is long. Borrowers can sign up for Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
While there are some subtle but important differences between the various IDR plans, the basic premise the same. Borrowers on income-driven repayment only have to pay a small percentage of their monthly income towards federal student loans. These plans are all designed so that federal student loan borrowers do not have to decide between paying the electric bill or defaulting on a student loan.
The government accomplishes this goal of student loan affordability by determining a borrower’s discretionary income. Monthly payments are between 10% to 20% of a borrower’s monthly discretionary income, depending upon the IDR plan selected. (More details on IDR plan selection and strategy can be found here.)
For social security recipients, this often means that monthly payment could be $0.
As a general rule, individuals and couples whose only source of income is social security probably will qualify for $0 per month payments. Those who have a pension, 401(k), or outside income may have larger payments.
A Special Note for Borrowers with Parent PLUS Loans: Parent PLUS loans are not eligible for any of the income-driven repayment plans. However, borrowers can consolidate them to gain eligibility. This article on Parent PLUS Loan Repayment for Borrowers on Social Security explains the process.
Does Social Security Income Affect IDR Student Loan Payments?
The short answer is maybe. Some borrowers will qualify for $0 payments, but others will have larger student loan bills because of their social security income.
The slightly more complicated answer: If your social security is considered to be taxable income by the IRS, it will impact monthly payments on an IDR plan. If your social security isn’t taxed, it won’t affect monthly payments on IDR plans.
Getting more exact will require doing some calculations.
Calculating IDR Payments for Borrowers on Social Security
The important number for calculating Income-Driven payments is Adjusted Gross Income or AGI. Using your AGI from your most recent tax return, any borrower can use the Department of Education’s Loan Simulator to preview monthly payments. The loan simulator shows monthly payments on all of the available federal repayment plans.
Those who are planning their retirement may have to do a little more math.
Generally speaking, when doing taxes, taxpayers add up their gross income, subtract certain deductions, and then arrive at their AGI.
Social Security works differently. Anywhere between 0% and 85% of a beneficiary’s social security could be included in their AGI. The exact percentage depends upon income and filing status. The Social Security Administration has a nice summary of how social security benefits are taxed. Those who want to generate exact numbers will need to use the IRS Publication 915 to calculate the social security that is considered taxable income.
If 0% of your social security is taxed, your IDR payments will likely be $0 per month. As the tax on your social security goes up, your IDR payments will also go up.
Once you have a better idea of your taxable social security income, you can use the Loan Simulator to get a more accurate estimation of IDR payments.
Federal Loan Forgiveness and Debt Elimination
Monthly payments only tell part of the student loan repayment story.
Many borrowers have monthly payments smaller than the amount of interest that the loan generates each month. If the loan balance is growing, how will the debt ever be eliminated?
Seniors living on social security and making small federal student loan payments will see likely see their debt eliminated in one of two ways.
- Student Loan Forgiveness – Borrowers on income-driven repayment plans qualify for student loan forgiveness after 20 to 25 years, depending upon their repayment plan.
- Death – If a federal student loan borrower dies, their student debt is forgiven in full. The estate will not receive a bill, and the federal government will not try to collect from an inheritance left behind or life insurance proceeds.
Thus, many social security beneficiaries may never have to make another student loan payment. They will have to stay enrolled in income-driven repayment, which requires yearly income certification. These borrowers will eventually qualify for forgiveness.
Private Student Loan Options for Borrowers on Social Security
Private student loans are far less flexible.
The rules for private loans can vary from one lender to the next. The loan contract specifies the terms between the lender and the borrower.
Generally speaking, private lenders have no special programs for borrowers on social security.
In most cases, repayment in full will be the only option. Occasionally, refinancing the debt with lenders like Splash or SoFi can help. However, these opportunities are limited to borrowers who can pass a credit check.
Details and tips on refinancing are available here.
Hello Michael – Thank you for all of the guidance provided on this site. I followed all the steps you recommended for IDR plan for Social Security recipients. The process worked exactly as you laid it out in your column. It took a bit of persistence to get through the process. However, we have ended up with a payment plan that is within our budget. Thank you again for all of your guidance!
Hi Bill,
Thanks for taking the time to leave such kind words. I’m glad to hear that it worked out so well for you!
MIchael,
I have federal student loans totaling appx, $88,000 for my son’s college education. When the loans originated, I, as his father, signed for them (never thought to have my first wife/his mother to sign off on them nor where the repayment addressed in the divorce settlement.). Anyway, fast forward to today, I have a new wife, loans have been in forbearance. I am retired on SS and a small pension. When loan payment continue, it appears the loan payments will be based on both my income and my new wife’s income. She was not in the picture, nor is it her son when the loans were taken out. We do currently file as married, joint return. Do I have to include my new wife’s income when it comes to determining the monthly payment? Again, the ex wife has no connection to the loans. Thank you.
Hi Don,
It sounds like you have Parent PLUS Loans. If the loans are in your name alone, you are legally obligated to repay the debt. I’d encourage you to check out the steps required to enroll in an IDR plan for your Parent PLUS loans. Sadly, it isn’t as simple as just signing up for an IDR plan.
As for your marriage, your new wife’s income could impact your monthly payments. If you file taxes jointly, the monthly payment is based on your combined income. If you file separately, the monthly payment is based upon your income alone. Filing separately usually lowers your student loan bill, but it can increase your tax bill. As a result there is a lot to consider when you decide whether to file jointly or seperately.
Hi Michael, I recently retired in 2022 from working in a school system as an esp.(assistant in kindergarten for over 30 years.) I have a parent loan out for my daughter when she first went to college in 2006. I have been on deferment at times and for years have been on income sensitive .it’s time to fill out paperwork again for the income sensitive but I am hearing that it is not or will not be in the forgiveness of the Biden administration, should I go on the income repayment plan?? My income has dropped significantly I am on Social Security and I have a small pension. I was hoping I would get some forgiveness. What are my options and will I ever be forgiven for this loan? Thank you so much.
Hi Cynthia,
It doesn’t look like Parent PLUS loans will qualify for the one-time forgiveness program. However, at this point, there is a lot we don’t know. The Supreme Court is hearing the case later this week, and the rules could change. I’d be shocked if it eventually included Parent PLUS borrowers, but nothing is certain.
One option for forgiveness would be repayment on an Income-Driven Repayment plans. I’ve previously written an article just for Parent PLUS loan borrowers who are living on social security. It should cover the details you are looking for.
Best of luck to you!
Hello Michael,
My original loan was $9,000.00 from a technical college 35 years ago. Due to a back injury I was never able to pay it back, I’m 65 years old now and I will be collecting SSI next year. Do I still have to pay it back?
Hi Sean,
To help with your question, I’d need a bit more information. For starters, was this original loan federal or private?
It was Federal.
In that case, there is a good chance that you won’t have to pay it back. The one-time forgiveness program is set to be decided by the Supreme Court this year. If the Biden administration wins, that will erase $10,000 or $20,000 of federal debt per borrower.
Additionally, they are conducting a one-time audit to update IDR payment counts. Given the age of your loan, it is possible that you may already qualify for IDR forgiveness. I’d suggest contacting your servicer to discuss whether or not you have alredy earned forgiveness under this program.
Plus, if you are going to live off of your social security income, you can use the methods described at the top of this page to eventually earn forgiveness.
If your income is social security and you are paying medicare part B, can you consider that as health insurance deducted from you check? The questions in the loan simulators do not make calculating easy with SS in the mix.
Hi Donna,
Some of those simulators are more accurate than others. You are probably safe counting Medicare Part B as health insurance. However, I should point out that the really important number is the AGI on your most recent tax return. If you are living on social security, your AGI might be lower than what these calculators estimate, which means your monthly payment could be even lower than what the simulator reports.
I have been on a non-payment status for years with regard to my student loans, due to very low Social Security. I did, however, receive an inheritance last year, which isn’t huge, but has been so helpful with alternative cancer treatments, which are keeping me in remission much better than chemo did. I depend on this money but am worried that the loan people will expect me to use that money for my loan payments. When I fill out the forms, they will see the money in my bank account and on my tax returns. I will owe $61,000 after the $10,000 is cancelled, per the new decision.
Hi Pam,
If by non-payment status, you mean you were on an IDR plan making $0 per month payments, the inheritance should not impact your monthly student loan payment.
Hi Michael, yes, but I was on IBR making $o payments per month.
I assume this is the same situation as IDR?
Thank you for your quick response. This has been weighing heavily and I couldn’t find this info anywhere else. I appreciate you and the site.
I should have been more clear with my response. IDR stands for income-driven repayment, it describes a category of repayment plans. The IDR plans include IBR, PAYE and REPAYE. Everything I said about IDR applies to the IBR plan.
This is very misleading. No Where does any intity state the loan doesn’t have to be replaced. Even if the loan is paid on with an IDR plan for 25 yrs and is so called forgiven. Bahaha it’s actually worse. The loan amount was just the tip of the ugly iceberg! Now that it’s forgiven the nice people up in Congress have fixed it so it’s now considered income! And now you owe a rediculous amount of fed income taxes that no one in the financial bracket of one of these borrowers would EVER be able to pay. Bull shit lies from start to finish.
Hi Connie,
You are right about the tax on forgiven debt being unfair to borrowers. Fortunately, recently passed legislation eliminated this tax bill until at least 2026. If you are interested in hearing more about it, this article explains why the tax bill is unfair, and why it is unlikely to come back.