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How to handle student loan debt if you’re a stay-at-home parent
Share the responsibility with your spouse, reduce repayments — or both.
5 ways to manage student loans as a stay-at-home parent
You might want to consider one of these options to adjust or share your student loan repayments with your spouse.
1. Consolidate your loans with your spouse
PenFed offers a unique refinancing option for married couples. Its Spouse Loan lets you combine your student debt with your spouse’s with rates and terms based on the highest credit score and income. It also considers your level of education, so this could be particularly useful if one of you has a graduate or professional degree.
Both of you need good credit to qualify — or near-excellent credit if you have more than $150,000 in student loans between the two of you. But it can be easier to qualify for if you don’t have a high income yourself.
2. Refinance your loans with your spouse as the cosigner
Another option to share the debt and get a better rate is to refinance the loan with your spouse as the cosigner. Look for a lender that doesn’t have income requirements for the borrower and cosigner — otherwise you won’t be able to qualify.
This is generally best if your spouse has a high-paying job. But skip it if you plan on applying for forgiveness or taking advantage of any federal perks like income-driven or graduated repayment plans. Federal loans become private once you refinance, meaning you’ll lose all of those benefits.
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3. Extend your loan term
Switching to a longer repayment plan gives you lower monthly repayments and reduces the upfront cost. Most lenders offer terms as long as 20 years, though federal loans can go up to 25. You can find out how to make the switch by talking to your servicer.
The downside is that you’ll still be in debt while your kids are in college, and you’ll pay significantly more in interest overall. Use our monthly payment calculator to find out how much switching terms will cost you in the short and long term.
4. Sign up for graduated repayments
Available for federal loans, graduated repayments start low and increase every two years for 10, 25 or 30 years — depending on your loan type.
This could be a good choice if you plan on going back to work after your kids are in school, since you can sometimes get even lower repayments than you would with a longer term. But it can be even more expensive. Weigh the cost by using the repayment estimator tool on the Federal Student Aid website.
5. Consider income-driven repayments
If you’re struggling with repayments, you also might want to consider a repayment plan based on your income. These are generally only available on federal loans, though some private lenders may offer it if you’re struggling. After 20 or 25 years, whatever balance remains on your federal loans is forgiven.
File taxes independently from your spouse? You might want to consider the Pay As You Earn (PAYE), Income-Based (IBR) or Income-Contingent Repayment Plan. Those only consider your income and might give you a low monthly repayment. Otherwise, check out how much you’d owe each month using the repayment estimator.
Watch out for taxes on income-driven forgiveness
The IRS considers some types of debt forgiveness as taxable income. This includes student loans forgiven under an income-driven repayment plan. It might be worth making some repayments toward your loans, even if you qualify for $0 repayments. That way you won’t be hit with as large of a tax bill come time for forgiveness.
Are there any other forgiveness options for stay-at-home parents?
Generally, no. Most forgiveness programs require you to work at a public service job for several years before you can qualify — which you would be ineligible for as a stay-at-home parent. But some like Federal Perkins Loan forgiveness count volunteer positions toward that requirement.
However, that can involve a significant time commitment. Your best bet is to sign up for an income-driven repayment plan and stick with it.
How else can I save on my student loans?
From avoiding deferment to reaching out to your service before you miss a repayment, here are a few tips for saving money on your student loans:
- Rethink how you file taxes. It could be worth a visit to a tax adviser to figure out whether you can benefit the most from filing individually or jointly.
- Freelance or work part-time. Use your earnings to make extra repayments toward your student loans. The faster you repay, the less you’ll pay in interest.
- Prepay when you can. Talk to your spouse about putting windfall payments like annual bonuses toward your student loan repayments to help you get out of debt faster.
- Avoid deferment and forbearance. In most cases, interest that adds up while your repayments are paused gets added to your balance once they start up again.
- Contact your servicer if you’re struggling. Your servicer should be able to point you toward different options if you think you’re in danger of missing a repayment.
Refinancing with your spouse or changing your repayment plan can make it easier to manage your loans as a stay-at-home parent. But you also might want to take steps to make extra repayments toward your loan, when you can. You can learn more with our guide to student loan refinancing.
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