Jul 6, 2026
When you think of routine retirement expenses, things like Medicare, traveling, and early bird buffets are usually what come to mind. But, for a growing number of seniors, there’s a much more troublesome line item in the budget: Student loan payments.
Six times as many adults ages 60 and over had student loans in 2024 compared to 1994, and the amount of educational debt carried by those seniors increased twentyfold during that period.
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Whether seniors have their own loans still to pay or borrowed for their kids, owing a fortune to the Department of Education (or private lenders) can put a real crimp in retirement plans.
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Let’s pretend, for example, that Barb and Joe are 64 and desperate to quit working, but are carrying $200,000 in student loan debt. The couple isn’t sure what to do, because they can’t just work forever, but they’re also worried that their debt will follow them and strain their budget until they die.
So, is that a possibility, and how should the couple proceed?
Having student loans doesn’t always mean you can’t retire
For Barb and Joe, the looming question is whether it’s possible or smart to retire with their debt. And the answer to that is: It depends.
“A $200,000 student loan balance by itself shouldn’t determine whether someone retires,” Joseph Reinke, a Chartered Financial Analyst (CFA) and founder of FitBUX, told MoneyWise. “Retirement is ultimately a cash flow decision, not simply a debt decision.”
Reinke believes that the choice should be made based on whether you can comfortably cover the loan payment and your other living expenses with income from your investments, Social Security, and pension. If you can do so without leaving yourself unprepared for surprises, waiting to retire may not be worth it.
“Delaying retirement could mean working several more years to pay off the loan, when those same years might have little impact on long-term financial security if retirement income can already support the required payments,” he said.
Of course, however, that’s a big if.
“A $200,000 federal loan on the standard 10-year plan runs roughly $2,400 a month,” said Christopher Walsh, senior advisor and regional director at Capital Choice Arizona. “If they’re planning on retiring by the 4% rule, they’re going to need to earmark nearly $700,000 of their retirement portfolio to comfortably make that monthly payment. For most people, that’s a significant chunk, if not the lion’s share, of their retirement.”
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Walsh also warned that the extra distributions to cover the loans could increase their tax bills and potentially result in higher Medicare premiums. Barb and Joe should look closely at their investment accounts, the withdrawals they’d need to make, and the tax implications to see if they could cover their loans and other expenses if they retired.
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Some student loan debt may be forgiven in time
When Barb and Joe try to figure out if they can afford to leave work with loans, they also must explore their payment options to see what makes sense.
“The first step is understanding exactly what type of loans you have because the strategy is very different for federal and private loans,” Reinke said. He explained that federal student loans have flexible payment options, including income-driven plans that cap payments at a percentage of income. These could provide much more flexibility.
If Barb and Joe are eligible for the new Repayment Assistance Plan, for example, monthly bills would be capped between 1% and 10% of their Adjusted Gross Income (AGI), and any unpaid debt would be forgiven after 30 years. They may not live that long, but if their income is relatively low, they could make an affordable monthly payment until they die, and their debt would then disappear.
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If they aren’t eligible for income-driven payment because they have PLUS Loans or private student loans, or if their income is very high and they’d end up with large monthly payments, this strategy won’t work. In this case, they’ll have to see if their payments are affordable based on retirement income, continue working until the debt is paid, or explore refinancing to lower costs.
Walsh also suggested another alternative: Downsizing.
“It could be possible to sell a $650,000 residence and move into a $400,000 one and, after fees and expenses, walk out with $200,000 and a more manageable house that costs less in electricity and upkeep,” he said. In other words: The money from the home sale could eliminate the student loans and lower costs going forward.
Avoid draining retirement savings
While Barb and Joe have multiple options, there’s one move they should try to avoid.
“Avoid making the mistake of draining retirement savings just to eliminate student debt,” advised Reinke. “Withdrawing a large portion of your retirement assets can trigger taxes, reduce future investment growth, and leave you with less flexibility later in retirement.”
In many cases, he added, it’s better to first build a retirement income strategy — “then determine the most efficient way to manage the student loan alongside it.”
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
