Before You Move Back Home with Your Parents to Save Money and Pay Off Student Loans, Consider This

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When you graduate from college, it feels like you are finally free to start your life as an adult. You’re no longer stuck in school, and no longer at the mercy of anyone else’s rules. It can feel exhilarating and liberating to finally strike out on your own. But if you’re one of the 45 million Americans in student loan debt, you’ve likely pondered the question, “Should I move back in with my parents?”

The optimism you feel upon graduating can quickly be eclipsed by the costs of living independently. Let’s face it, being an adult doesn’t come cheap. Rent, utilities, insurance, groceries, transportation and more can add up quickly. And when you’re trying to dig yourself out of student loan debt, it can be a challenge to manage it all. Here’s what to consider if you’re thinking about moving back in with your parents to save money.

Should I move back in with my parents?

If you’re contemplating living at home after college, you’re not alone. According to a recent TD Ameritrade survey, 50% percent of millennials plan to move back in with their parents after college.

That number isn’t surprising when you consider that millennials have been moving home for years. The Pew Research Center reported that 15% of millennials between the ages of 25 to 35 lived with their parents as of 2016. Comparatively, just 10% of Gen Xers still lived with mom and dad when they were the same age. Millennials are also living at home after college for longer than other generations. According to Pew, 91% of millennials surveyed hadn’t moved in the past year.

As millennials continue to battle high unemployment and low wages, moving back in with their parents — or “boomeranging” — may seem like a good option. After all, it’s difficult to balance making rent, saving for the future and paying off student loans when they’re earning 20% less than their parents did.

There’s less stigma around moving home now as well, likely because so many young professionals are grappling with the weight of large student loan balances. In that sense, the social cost of boomeranging home is less steep.

But is it the right decision for you? Moving back in with your parents comes with emotional costs, and you may struggle with the social and lifestyle adjustments that come with living under your parents’ roof again. Certainly, those trade-offs may be worth it to get your own financial house in order. But it’s a decision only you can make, and one you’ll want to think through carefully. Here’s what you should consider if you’re thinking of moving back home after college.

Look at the situation realistically

Moving home to live with your parents in your 20s or even 30s can be tough. Once you’ve had a taste of freedom and independence, going back to the house you grew up in and living under your parents’ “house rules” can be challenging.

If you’re unemployed or underemployed, moving back home can make sense though. Even if you’re working and could technically make it on your own, it may seem like the best option for saving money.

But there are some important considerations you should think about before heading home. Consider the following:

  • What’s your relationship with your parents like? Do you get along with your parents? Will you drive each other mad in less than a month’s time?
  • What are you giving up to move back home? Everything comes at a price. Even though moving back home might make sense financially, it could mean giving up what you value most about your post-college life — autonomy, independence, freedom and personal relationships forged with roommates and peers on your own terms.
  • What are the terms and conditions of the arrangement? If your parents are cool with you moving back home, will they allow you to live rent-free or will they charge a nominal amount? Will you have a curfew? How will this move affect your personal and romantic relationships? If your parents plan to charge you rent, compare what you’ll pay them to how much you’d pay for your own place. Ask if they expect you to contribute to utility bills and groceries as well. You may find that you’re not saving as much by moving home as you expected, and that could prompt you to rethink whether it’s your best option.
  • What is your expected timeline? Moving back home can be tough at first, but then you can quickly get a little too comfortable. Mom buys groceries, cooks for you, does your laundry — maybe you don’t even pay rent. Sweet deal, huh? It can be easy to stick around and wear out your welcome, so come up with a realistic timeline for moving out. Decide on a firm plan of action, such as deciding to move back home, pay off your loans in a year and then move out.

Ultimately, it’s important to look at the situation realistically before giving up your freedom and decide if it actually makes sense for you. Will you be able to maintain a positive relationship with your family without losing your sense of self? This and all of the above are important things to consider before making the move back to your old bedroom.

Weigh the real costs and benefits of living at home after college

Beyond thinking about your family relationships and personal sacrifices, it’s also crucial that you look at all the hidden costs of moving back home. Make sure to take the following into account before making your decision:

  • Consider your employment situation — and the associated costs. If you are employed and your parents live near your place of work, you could save on both rent and commuting costs. But if your parents live a significant distance from your job, does it make sense to pay more for gas or public transportation, or find a different job so you can live rent-free?
  • If you’re unemployed, think about whether it’s easier to find a job where your parents live. You’ll also want to evaluate your job prospects in your hometown. How is the economy there? What is the job market like in your industry? Don’t assume you’ll be able to land something right off the bat unless you’ve been in touch with prospective employers or know there is a hiring boom. Moving back home to pay off debt may seem attractive, but if you can’t find a job, you won’t be able to make financial progress the way you hoped.
  • Look at the big picture. It can be tempting to move back home when you are struggling to pay rent and student loans. However, it’s important to evaluate all the factors and additional costs. If moving home means moving to another state, consider how you’ll do that. Will your parents drive out to help? Or will you need to rent a moving trailer or truck? How long will it take you to move home? And what are the differences in income tax rates where your parents live? It’s easy to overlook these expenses, but nothing is free, not even moving back to your childhood home.

While living with your parents sounds like a cost-saver on the surface, you may discover that the money you spent on the move and surviving until you find a job would have been better spent where you already are. You could put those funds toward your debts, or invest them in skill-learning courses that will help you land a better-paying position without giving up your newfound independence.

Amanda Abella, who was a boomerang kid herself and is now a millennial business coach, offers this advice: “It’s a Catch-22. Don’t live in a city where it’s cheaper but you can’t find a job, or go to a city where there are lots of jobs but you can’t even cover rent.”

For her, living at home after college made sense financially. “Even when I had a regular job, had I moved out [of my parent’s house] there was no way I would have been able to set up a retirement account, start investing and start a business,” Abella said. She admits that her entire paycheck would have gone to rent and bills, making it difficult to get ahead financially.

The bottom line

In the end, moving back home is a very personal decision. Consider not only all of the financial implications but also the emotional, social and psychological ones. How will it affect your lifestyle as a whole?

Some people find that moving back home isn’t the best choice, while others find that it makes the most economic sense. Only you can decide what is right for you. To make the decision, understand how much you will be saving, and if you do make that move, be sure the money you save is actually going towards your debts.

Most importantly, have a game plan for how and when you’ll strike out on your own once again. Moving back in with your parents can help you get on your feet while paying off debt, but this decision shouldn’t be made lightly or considered a long-term solution. Once you have built up savings and have sufficient income to pay bills and your student loans, it’s likely time to fly the coop.

Casey Hynes contributed to this report.

Interested in refinancing student loans?

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LenderVariable APREligible Degrees 
1.99% – 5.64%1Undergrad
& Graduate

Visit Earnest

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.28%3Undergrad
& Graduate

Visit SoFi

1.89% – 6.77%4Undergrad
& Graduate

Visit Splash

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

1.99% – 5.41%5Undergrad
& Graduate

Visit CommonBond

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of September 9, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.28% APR (with AutoPay). Variable rates from 2.25% APR to 6.28% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.