Financial Tips

Managing Education and Family Expenses

Student loans are like monkeys on every professional’s back. It’s hard to get rid of them especially at a time when you really need your monthly income to be solely for your family expenses. Student loan is usually an American’s very first debt because college education in America is very expensive. Those who want to earn a degree have no choice but apply for a student loan.

According to statistics, 2017 is the worse yet in as far as student loan burden is concerned. Americans are more burdened than ever with their student loans. This means that the Class of 2016 have the highest student debt ever. On the average, each of the most recent graduates—at least those who took out a loan—owe the government over $37,000 in student loans. There are 44 million Americans who owe Uncle Sam over $1.4 trillion in student loans. The credit card debt is just about half of that.

Let’s look at the case of Class 2016. If you want to pay off your loan as soon as possible, you could take the 10-year term. But that would mean a monthly amortization of at least $617—at least because this doesn’t include the interest. That’s too much for anyone, especially someone who is just trying to figure out his or her footing in the real world. So you extend the term to 20 years and cut the monthly amortization in half. That is still a lot! But just for the sake of painting a picture, you decide on a payment of $300 a month payable in over 20 years. That’s already a big enough monthly burden and then you start a family. On top of the student loan, you have to pay for a house, a car and utilities. And if you have kids, the expenses balloon with milk, diapers and baby stuff. And when they get older, there’s also school that you have to think about—all those when you still have to pay for your own college education.

 Still, there are others who continue to go to school while already starting a family. Some want to further their academic knowledge through a masters or doctorate degree. Advance education is like an investment since such achievements will allow them to earn more when they are done. Some even pursue graduate studies even with student loan still a burden.

So here are some tips on how to manage your student loans.

  1.   Get organized

Getting your finances organized can really make a difference. Create a spreadsheet containing all your monthly expenses and your incomes—if your spouse is also working. This is important because it makes all your expenses clear and tangible. When you see all those numbers, it will also help you be more practical and perhaps more thrifty, too. When you see how much you have to pay for in a month, you will realize you don’t actually need to enroll yourself in a gym because the membership fee is better off used to pay for your debt. After all, you can always work out in the park. It’s free, too. Perhaps you could give up your insatiable taste for the fancy life. Or you could give up the other car and just carpool to and from work.

Also, when you organize your finances, it will be easier to track them down. This is important because you don’t want to miss on any of the payments because if you do, you get a penalty, which is so unnecessary. According to the Student Loan Debt Statistics, about 11 percent of those who have student loans are delinquent. A penalty fee could make a difference in your debts. And when you look at your debt going down every month, it is very satisfying that you just want to make them smaller and smaller.

 Another way to organize your debt is to link up with a loan company that could consolidate all your debts—including credit cards and personal loans. This way, you only need to take care of one payment.

  1.   Look at alternative payment options

If your income—or combined income with the spouse—is not enough, then it’s probably wise to look at the other alternatives. There are three options:

  •        Income-based repayment
  •        Income-contingent repayment
  •        Pay as you earn

All these repayment methods allow you to extend repayment from just the regular 10 years. In the case of the income-based and income-contingent repayments, payment is extended to 25 years. In the third option, the extension is another 10 years or a total of 20 years. There is catch here, though, as with any other long-term loans. The interest you will be paying will be much higher considering that interest rates are added every month. But sometimes, you just don’t have a choice since you need to lower monthly expenses.

 Here’s a tip: if you find yourself enjoying a windfall, try to pay more than your monthly amortization to reduce the base amount of your loan.

  1.   Research child care options carefully

If both spouses have careers, then it is important to look for alternatives in order to save on childcare options. Obviously, if you have student loans to take care of, you will need to continue working. However, it might be worth noting that grandparents might be willing to help out in as far as taking care of the children is concerned. Of course, we don’t want our parents to be burdened by this but if they offer, then you might as well take it.

But if it is not an option, just make sure you have all your childcare information in order. Childcare could be very expensive: between $4,000 and $12,000 a year. Not only that, you have to buy school supplies. However, if you are armed with the right knowledge, you can choose the most practical of them all.

  1.   Claim tax breaks

 This only applicable for parents who are also in school and not for those who have student loans: parents who are in school can claim education tax credits and deductions as well as child tax benefits. You have to take advantage of the break that is available out there.

 It’s definitely going to be a hard life balancing expenses when you have student loans / expenses when you have a family. But it will be worth it: you have an education to satiate you intellectually and you have a family to fill your emotional needs.

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