With the rising cost of tuition, many parents haven’t saved enough before their child begins college. When a payment plan through the university — while their child attends school — isn’t adequate, it’s often the case that parents decide to take a parent loan.
These loans place the debt in the parent’s name, with the liability on them. The terms of the loan are clear from the start, and this may work well if all goes as planned. If changing circumstances in the parent’s life occur at the same time there is a push to save for retirement, there are several options for parents to get back on track with their finances.
How To Deal With Student Loans As a Financially Struggling Parent
- Refinance by taking out a new loan with more favorable terms, or, if your parent loan allows repayment before interest kicks in, do what you can to pay the original loan off as quickly as possible.
- Treat your education loan payments the way you treat any other payment. Make more than one payment per month, or pay more than is due each month and designate the extra money as principal to reduce the amount of interest you’ll pay long term. Also, use autopay so that you always pay on time and don’t have any negative reports of late payments.
- Take on a side gig or work additional hours to generate income for the specific purpose of paying down your loan.
- View this loan as part of your total indebtedness. Then, pay more to the highest interest rate debt each month to clear the amount you pay out each month. Apply that extra to your other debts to clear your debt more quickly.
- Make sure you contribute something to an IRA each month, or participate in your firm’s 401(k) plan — especially if there’s matching. Even a small amount will make a difference in a few years, and taking care of your future needs is just as important as paying off your current debt.
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