College loans
Despite drawing close to retirement, people age 62 and over now comprise the fastest-growing segment when it comes to taking out loans for education. On average, they carry almost $29,324* in college debt either for themselves or for their children.
Good idea? Probably not. Student loans generally can't be discharged even in bankruptcy, and up to 15% of your Social Security payments could be garnished if you fall behind on student debt.
And remember that unlike mortgage interest, interest on student debt may not be tax-deductible.
The best strategy is to take out loans only if they're scheduled to be paid off before you retire. But if that's not possible, what should you do? As with a mortgage, think carefully before withdrawing money to pay off debt in a lump sum, especially if you're under age 59½.
On the other hand, using some of your income to make extra student loan payments before you retire can be a good move—if you're paying a higher interest rate than what you expect your retirement investments to return.