Michele Findeis, a mother of four, is helping her three oldest children pay for their undergraduate degrees — in addition to repaying her own student debt.
“In total, the four of us currently have $297,500 in student loan debt, and my son is only a freshman in high school,” Findeis said.
Many parents are in similar situations: repaying student loans from their own education while trying to find ways to pay for college for their child.
Dealing with both money priorities can feel overwhelming, but learning and taking action can make a difference. Here’s a look at the reality of managing your student debt while figuring out how to help your child pay for college, along with some strategies for dealing with both.
Ways to pay for college when you have student debt
Findeis returned to college after having three daughters (one of whom is a Student Loan Hero employee). She completed her bachelor’s degree in accounting in 2002 and graduated with $45,000 in student debt. However, she doesn’t regret taking out loans for herself.
“I was of the mind that $45,000 of debt was an investment in the degree that has allowed me to provide for my family,” Findeis said. “I do, however, feel overwhelmed by my children’s student loans.”
According to our recent parent student loan survey, many parents are in similar situations. Among parents who borrowed for a child’s college education, 55 percent reported that their student debt totaled $40,000 or more.
But two-thirds of parents surveyed don’t regret taking out or cosigning student loans for a child’s education. Like Findeis, these parents probably counted on student loans rather than savings when considering ways to pay for college.
As a parent with your own student debt, your loans pose their own challenges. Your student loan payments eat into your monthly cash flow and leave less room in your budget for college costs.
By using the following strategies to manage your debt or lower your student loan payments, you can put together a plan for how to help your child pay for college.
1. Adjust federal student loan payments
If your debt is in the form of federal student loans, you likely can adjust your payments and free up cash each month to cover educational expenses.
You could switch to an income-driven repayment plan, an Extended Repayment Plan, or a Graduated Repayment Plan to make your monthly payments more manageable.
2. Refinance high-interest or private student loans
You also have the option to lower your monthly payments for private student loans, but the process is different.
Instead of changing your repayment plan, you’ll need to refinance your private student loans. That’ll give you the chance to create a new loan with new terms — and lower monthly payments.
Take a close look at refinancing both federal and private student loans that carry high interest rates. With good credit and a higher income (usually $50,00 to $60,000 or more), you can qualify for great rates on your refinanced student loan.
Refinancing could lower your interest charges, which means more of your money could go toward paying off your student debt or finding out how to help your child pay for college.
Findeis, for example, took advantage of student loan refinancing to get a 4.00% interest rate on her debt. She also chose a longer repayment period, which helped lower her student loan payments to just $225 per month.
3. Make extra payments on your student loans
Findeis is also making $200 in extra student loan payments each month. That’s “with the intention of making my final loan payment when my son graduates from high school in June 2021, 19 years after I graduated from college,” she said.
By making those extra payments, Findeis will free up $425 per month. See if you have low-balance student loans you could knock out before your child is in college. You’ll 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 college decisions, and that starts with discussing the financial realities of attending college and repaying student debt.
By encouraging your child to choose an affordable college that matches their academic and career goals, you can greatly limit both your student debt and your need to take out parent student loans.
Highlight the great value of attending an in-state public college (even better if they can live with you rent-free). You might even suggest attending a community college for the first two years, which saves students $11,377 on average.
5. Get free college funds — or credits
One of the best ways to pay for college is to get someone else to do it. Parents and students should devote time and energy to finding free money for college:
- Complete and submit a Free Application for Federal Student Aid. This is your ticket to qualifying for federal student aid such as Pell Grants and federal student loans. Many colleges also use FAFSA information to evaluate 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 you pay for college.
- Look for ways to earn free or cheap college credits. “Knowing what I know now, I am encouraging [my son] to take at least four AP classes during high school so he has one semester of credits complete before he graduates,” Findeis said. You also can look into dual-enrollment programs for your child or have them earn credits through the College-Level Examination Program.
6. Shop for the best student loans
Ultimately, there probably will be some college costs you can’t cover with cash, savings, or scholarships. As you look for additional ways to pay for college, student loans can fill the gap.
“Shop for the best interest rate!” Findeis advised. “One of my daughters took a loan as a freshman for $30,000, and the balance to repay was over $40,000 when she graduated because the interest rate is 12.125%.”
Compare all forms of student loans available to you to find the most cost-effective ways to pay for college. Borrow through the most affordable options first, which often are Direct Subsidized Loans or Direct Unsubsidized Loans with interest rates of 4.45% for the 2017-18 academic school year.
If Direct Loans won’t cover everything, start comparing federal Parent PLUS Loans to private student loans.
Also consider cosigning a private student loan with your child or taking out private parent student loans in your name. If you’re well-qualified, you often can get rate offers that beat the costs of Parent PLUS Loans.
“Do what you can to not allow interest to accrue,” Findeis suggested. “Make interest payments while your child is in school and try to pay small loans off completely.”
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.97% – 12.97%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|4.00% – 13.00%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.19% – 12.06%9||Undergraduate, Graduate, and Parents||Visit Citizens|