Dealing with student loans is tough. Dealing with student loans while raising a family is a whole other level. While not a father myself, I can empathize with the laser-sharp money management skills it must take to raise a family while paying off student loan debt.
There’s no one way to manage the complicated process of paying off debt from the past while handling urgent family expenses today. But it can help to learn from people who’ve already done it.
Check out what a few dads have to say about how they face this battle head on – and win.
1. Income-driven repayment plans can give you breathing room
Generally, income-driven repayment plans aren’t the ideal way to pay off debt since they extend your repayment timeline and tend to cost more in interest. But if your household is feeling the squeeze, these programs can make all the difference.
Declan Wilson, founder of SHRPA, has a new baby and his wife currently goes to pharmacy school. Even so, he’s already paid down $10,000 in student loans while on an income-based repayment plan. As soon as his wife graduates and starts working, he’ll consider refinancing his and his wife’s loans.
Meanwhile, Danny Masters, dentist, dad, and co-author of Red Two Green, is working towards debt payoff while on the REPAYE plan. He manages to achieve progress even on his income-based payments by paying more than what’s due as often as possible.
Masters is also focused on keeping household expenses low.
“We coupon like crazy, use cash back apps, and shop sales for all of our little guy’s stuff,” Masters explained. “Clothes, toys, etc. we almost always buy second hand.”
A combination of income-driven repayment and the lowest possible living expenses can be a one-two punch for making your budget work. Just make sure to pay extra whenever you can.
2. Your debt doesn’t have to be insurmountable
Few things are as demotivating as extremely high debt. I know, I paid off more than $100,000 in student loans myself.
Masters also feels this pain. He and his wife have accumulated more than $600,000 in student loans to fulfill their dreams of becoming a dentist and a lawyer, respectively. But he’s not letting that keep him down.
Masters has already paid off $65,000. And, like Wilson, he eventually plans to look into refinancing to see if he can get a lower interest rate.
If you’re facing a seemingly insurmountable amount of debt, don’t let it stop you. If you can refinance your student loans to get a lower interest rate, then you can make faster progress on your payoff.
For example, let’s say you have $150,000 in student loans at 7% interest on a 20-year repayment plan. Then you refinance at 4% for those 20 years. Your payments will go from $1,163 per month to $909 per month.
That extra breathing room in your budget is nice, but the kicker comes with the amount paid overall. On the original loan, you’re looking at a total of $129,108 paid in interest alone. On the new loan, you spend just $68,153 in interest. That’s an overall savings of $60,955 by getting a lower interest rate.
However, it’s important to note that refinancing federal student loans can come with some downsides. Because you can only refinance through a private lender, refinancing forfeits your eligibility for government protections such as income-driven repayment plans, Public Service Loan Forgiveness, and deferment/forbearance.
Refinancing can save you thousands of dollars and years of payments, but it’s still an option that should be considered carefully.
3. Let your family be your motivation
When you feel like you’re on your last legs as you try to pay off student loans while taking care of a family, let remember why you’re doing it all in the first place.
“In a strange way, having a kid and student loans drives me to work harder,” Wilson said. “Everything I do is a calculated move to push our family toward a financially sound (and one day debt-free) foundation.”
Masters’ family also serves as his motivation to keep tackling his debt.
“I think keeping [my son] at the forefront of most of the financial decisions we make helps, even in the small stuff,” explained Masters. “We want to get out of debt so we can give our son a good life, and ultimately help him pay for college so he doesn’t end up in our predicament.”
The state of American families and student loan debt
If you’re a dad in debt, you’re not alone. Americans are currently saddled with more than $1.4 trillion in student loan debt, while the average 20-30 year old pays $351 a month on their loans.
Adding to this debt load is a rising cost of living expenses. Last year The Brookings Institution found that housing, food, transportation, health care, and clothing in America takes up 66 to 82 percent of household income. For middle-income to low-income families, it takes up 78 to 82 percent. That doesn’t include student loans.
What’s more, the cost of health care has risen drastically, up 60 percent for middle-income families since 1984. All this shows that the only way to make real headway on student loan debt is to either lower your cost of living or lower your payments – ideally, both.
It’s a hard battle you’re fighting. But every step of the way you’re also being a role model to your children. Remember that when times get tough but you continue to make your financial well-being a priority, they’ll know the importance of doing the same.