Plan early for the student loan payoff

Plan early for the student loan payoff

Planning for college should start with the possible reality of taking on student loan debt. Help your child understand the impact of that decision early. There could be a big payoff later by keeping borrowing for college in check. Start your family discussion with planning for how to repay student loans in mind.

The reality of college costs

If you’ve been saving for this moment with LGFCU’s Coverdell Education Savings Account or a state-sponsored 529 College Savings Plan, and have enough saved for college tuition, move to the head of the class. However, if your savings aren’t enough, there’s a strong likelihood you’ll need a student loan to cover college costs, since in most cases, the price of higher education has risen over the years.

According to the most recent data by the U.S. Dept. of Education and the National Center for Education Statistics, here are the changes in costs for undergraduate tuition, fees, room and board between 2004-2005 and 2014-2015, after adjustment for inflation:

Find the lowest interest rate option

With an eye toward affordable repayment, work with your student to find loans with the lowest interest rates. Federal student loan rates are often lower and offer more flexible repayment plans than private loans. Begin by creating an account for both parent and student borrower at If necessary, you can search for private loans at the Consumer Financial Protection Bureau website.

Keep borrowing to a minimum

Working together, begin talking about an action plan for student loan repayment options as early as possible. Do the math together, calculating future monthly loan payments using the federal student loan repayment calculator.

With monthly payments sometimes being larger than rent or a car payment, your student may become more serious about reducing the amount of debt he accrues ahead of time. The less owed, the less your graduate will need to repay.

Seek out part-time work with employers who pay

Your college freshman may not be ready for the corner office, but savings from a part-time job can help with college expenses. Some employers offer tuition reimbursement to help reduce out-of-pocket school costs. If your student plans to work part-time while in school, finding a job that pays wages and pays for school could help reduce the amount of loan money that needs to be repaid. The law allows for an employer to contribute up to $5,250 as a reimbursable college expense.

Get busy with budgeting

Two of the best ways your student can keep future loan debt in check is to budget successfully for monthly payments and secure the income to make them on time each month. The ability to manage their money will play a large role later as students calculate exactly how much is owed and what they eventually can afford to pay.

When beginning to repay federal student loans, your child may select or be assigned a repayment plan. As financial circumstances change — hopefully for the better — your graduate can change repayment plans at any time online for free using the government’s student loan repayment calculator.

Average total tuition cost, selected years 1985-2015. Source: National Center for Education Statistics

College plus loans

The end of college marks the beginning of the rest of your child’s life as an independent adult. It’s possible this next phase will involve repaying student loans. Start the conversation about borrowing sooner rather than later.

The advice provided is for informational purposes only. 

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