How to save for college while paying off your own student loans

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Michele Findeis, a mother of four, helps her three oldest children pay for their undergraduate degrees, in addition to paying off her own student debt. “In total, we four currently have $ 297,500 in student loan debt, and my son is just a freshman in high school,” Findeis said.


According to our Parent student loan survey, many parents are in similar situations. Among parents who borrowed for a child’s college education, 55% said their student debt totaled $ 40,000 or more.

As a parent with your own student loan debt, your loans come with their own challenges. Your student loan payments eat up your monthly cash flow and leave less room in your budget for tuition.

Managing both financial priorities can seem overwhelming, but learning and taking action can make the difference. Here’s a look at the reality of managing your student debt while discovering how to help your child save or pay for education, along with some strategies for dealing with both.

How to save or pay for college education when you have student debt

1. Adjust Federal Student Loan Payments

If your debt is in the form of federal student loans, you can probably adjust your payments and free up money each month to cover education costs.

You can switch to an income-based repayment plan, an extended repayment plan, or a phased repayment plan to make your monthly payments more manageable.

2. Refinance high interest or private student loans

You also have the option of lowering your monthly payments for private student loans, but the process is different.

Instead of changing your repayment plan, you will need to refinance your private student loans. This will give you the opportunity to create a new loan with new terms and lower monthly payments.

Take a close look at refinancing federal and private student loans that carry high interest rates. With good credit and a higher income (typically $ 50.00 to $ 60,000 or more), you can qualify for great rates on your refinanced student loan.

Refinancing could lower your interest costs, which means more of your money could be used to pay off student debt or find out how to help your child pay for school.

Findeis, for example, took advantage of the refinancing of a student loan to obtain an interest rate of 4.00% on its debt. She also chose a longer repayment period, which reduced her student loan payments to just $ 225 per month.

3. Make additional payments on your student loans

Findeis also makes $ 200 in additional student loan payments each month. It is “with the intention of making my last loan payment when my son graduates from high school in June 2021, 19 years after graduating from college,” she said.

By making these additional payments, Findeis will free up $ 425 per month. See if you have any low balance student loans that you can wipe out before your child goes to college. You will free up the payment to increase your monthly cash flow and avoid interest charges.

4. Choose an affordable college

As a parent, you play a huge role in guiding your child to make wise decisions in college, and that starts with discussing the financial realities of attending college and paying off student debt.

By encouraging your child to choose an affordable college that matches their academic and career goals, you can significantly reduce both your student debt and your need for parent student loans.

Emphasize the great value of attending a state public college (even better if it can live with you rent-free). You might even suggest attending community college for the first two years, saving students an average of $ 11,377.

5. Get free college funds or credits

One of the best ways to pay for college is to have someone else pay for it. Parents and students should invest time and energy in raising free money for college:

  • Complete and submit a Free application for federal student aidThis is your ticket to qualify for Federal Student Aid such as Pell Grants and federal student loans. Many colleges also use FAFSA information to assess students for scholarships and other forms of assistance.
  • Find and apply for as many scholarships as possible. Many organizations, including Student Loan Hero, offer scholarships to help pay for your university education.
  • Look for ways to earn free or cheap college credits. “Knowing what I know now, I encourage [my son] take at least four AP courses in high school so that he has a full semester of credits before he graduates, ”Findeis said. You can also research dual enrollment programs for your child or earn them credits through the college exam program.

6. Buy the best student loans

At the end of the day, there will likely be some tuition fees that you can’t cover with cash, savings, or scholarships. When you are looking for other ways to pay for your education, student loans can fill the void.

“Buy the best interest rate!” »Finde is advised. “One of my daughters took out a loan as a first year of $ 30,000, and the outstanding balance was over $ 40,000 when she graduated, because the interest rate is 12,125 %. “

Compare all the forms of student loans available to you to find the most cost effective ways to pay for your college education. Borrow the more affordable options first, which are often subsidized direct loans or unsubsidized direct loans with 4.45% interest rates for the 2017-18 school year.

If direct loans don’t cover everything, start comparing Federal Parent PLUS loans to private student loans.

Also consider co-signing a private student loan with your child or taking out private student loans for parents in your name. If you are well qualified, you can often get rate offers that exceed the costs of Parent PLUS loans.

“Do what you can so that interest doesn’t pile up,” Findeis suggested. “Make interest payments while your child is in school and try to pay off small loans completely. “

Originally posted on Student loan hero.

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