Should I Payoff My Parent PLUS Loan for Retirement


Dear Steve,

I have a parent plus loan with about 17000 left to pay. They are charging me 7.5%

I just sold my house and have the money to pay off the loan, my question is Should I.

I’m planning on retiring next year and wondering if I should just keep the money for retirement or just pay down my debt? I do get to take the interest off at tax time but is it worth it?

Should I pay off my plus loan? is the tax advantage worth it?



Dear Mike,

I am not a financial planner so all I can do is apply my opinion to your situation. Clearly we are all in trouble now. LOL.

Ultimately, if you want to make an emotional decision on what to do, people do that all the time. But if we were to think like a corporate officer then the motivation would be how we can best preserve your capital and reduce your expenses.

I would bet you don’t have enough saved for retirement. It’s a safe bet because most people don’t or have not. So that leaves us with two options.

Option 1: Pay off the loan, close the door on it and be done with it.

Option 2: Shove all the proceeds from the loan into your retirement funds, continue to make your regular payment, when you retire you can consolidate your Parent PLUS loan into a Direct Loan and then when your retirement income is lower, you can get on the Income Contingent Repayment (ICR) plan. This approach will lower your payment and preserve more of your cash for retirement.

You can estimate what your payment would be using this online calculator.

While you may never repay the full amount of the loan using the ICR, it would be forgiven after 25 years of payments or on your death.

See also  My Father is Making Me Pay His Parent PLUS Loans and I Can't Afford Them. - Brittany

I suspect you might benefit from some assistance in putting Option 2 in place. If so, one person to contact for assistance is my debt coach friend, Michael Bovee. You can reach Michael directly at 800-939-8357 extension 2. I spoke to him about this question so he will be familiar with it if you call.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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