For retirees, student loans usually mean Parent PLUS loans taken out for children or grandchildren, or sometimes loans from their own continuing education. Taking new student debt in retirement is generally risky: your earning years are limited, and if federal loans go into default, the government can garnish Social Security benefits and seize tax refunds, which can be devastating on a fixed income. Cambridge Credit Counseling

​

Why new student loans in retirement are usually a bad idea

• Less time to repay

  • With fewer working years left, it’s harder to pay down large balances without squeezing your retirement budget.

• Risk to Social Security and tax refunds (for federal loans)

  • Federal defaults can lead to garnished Social Security and intercepted tax refunds, reducing income you may be counting on. Cambridge Credit Counseling

• Higher stress on fixed income

  • Required monthly payments can crowd out essentials like housing, medical costs, and savings for emergencies.

​

If you want to help family with education costs

Instead of taking out new loans in your own name, consider:

• Direct tuition payments to schools

  • Paying the school directly for tuition is often not treated as a taxable gift, which can be more tax-efficient for estate planning.

• Contributing to a 529 plan

  • 529 plans can offer tax advantages for education savings and let the student or parents take the loan obligations in their own names. Cambridge Credit Counseling

• Gifting toward education costs

  • You can help with living expenses or smaller school-related costs while letting students or parents borrow in their own names with longer repayment timelines and more years of earning power to repay.

​

Managing existing student debt in retirement

If you already have federal or Parent PLUS loans:

• Use income-driven repayment (IDR) where possible

  • IDR plans can lower monthly payments based on your retirement income and family size. Cambridge Credit Counseling+1

  • After 20–25 years of qualifying payments, remaining balances on many federal loans may be forgiven. Cambridge Credit Counseling

• Consider consolidation for federal loans

  • Consolidating federal loans can simplify payments and sometimes help you qualify for more flexible repayment plans. Cambridge Credit Counseling+1

• Be cautious with private loans

  • Private student loans generally don’t offer IDR or forgiveness and may have fewer hardship options, so you’ll want to prioritize paying them down where possible.

Overall, it’s usually wiser to pay down or restructure existing student debt rather than take on new loans for liquidity. The interest rates and risks seldom justify using student debt as a retirement cash-flow tool when other, safer options are available.

​

Learn more from Cambridge Credit

• Student Loan Counseling – Get help reviewing all federal repayment, consolidation, and default-rehabilitation options. Cambridge Credit Counseling

• Why Seek Student Loan Counseling? – Overview of how counseling can help you build a realistic repayment timeline. Cambridge Credit Counseling

• Student Loan Debt Consolidation – Explains how federal consolidation works and which loans qualify. Cambridge Credit Counseling

• Student Loan Forgiveness – Describes forgiveness, cancellation, and discharge options for federal loans. Cambridge Credit Counseling

• Student Loan Deferment and Forbearance – Details temporary relief options and their pros and cons. Cambridge Credit Counseling