By Caroline Farhat
Are you planning to start (or add to your) family? Congratulations! Children are such a special joy, and starting a family is an incredible journey. Whether you’re already expecting or are just in the planning stages, there is a good chance you’ve started crunching some numbers to see how adding a family member will affect your monthly budget. It’s no secret that kids are expensive — the U.S. Department of Agriculture reported that, on average, it would cost a middle-income family $233,610 to raise a child born in 2015 through the age of 17. If you’re currently paying off debt, the eye-popping numbers a child costs may look even more daunting. But money should absolutely not stop you from starting a family. Of course, you want to be financially responsible, but you shouldn’t feel pressured to be debt-free before starting a family. Instead, focus on the things you can do to lighten your budget and leave more room for your new bundle of joy. Here’s how refinancing student loans can help.
Why Refinancing Student Loans When Starting a Family is a Smart Move
One of the biggest worries many new parents have about starting a family is the financial unpredictability children can bring to the household budget. Medical costs, childcare, and all of the latest baby products can certainly add up. One of the best ways to combat this unpredictability is by lowering your fixed monthly costs.
If you are currently paying off student loan debt, refinancing student loans is one of the smartest steps you can take to lower your monthly payment. In fact, student loan borrowers who refinance with ELFI* have reported an average savings of $309 per month1. To put that in perspective, that would get you 38 packs of 32-count diapers. Plus, the emotional benefits you can receive by throwing less money at your student loan debt and more on what is really meaningful to you can be priceless.
How To Refinance Student Loans
If you’re looking at your interest rate and are ready to refinance, you’ll be happy to know that it’s a simple process that can be done entirely online. If you refinance student loans with ELFI, the application process is 100% free, and refinancing has no origination fees or prepayment penalties. The ROI of refinancing student loans can also be quite large. Just an hour or two of work can yield you thousands of dollars in savings. Not bad, right? Here’s what to do:
- Check the requirements – While student loan refinancing is a smart move for many student loan borrowers, there are a few cases where refinancing may not be the best option. For example, if you qualify for student loan forgiveness through a federal program, refinancing student loans would make you ineligible for this benefit. Review the basic criteria for student loan refinancing to make sure it’s the best fit for your particular situation. It’s important to fully understand how the Public Student Loan Forgiveness (PSLF) program works and the eligibility requirements.
- Crunch the Numbers – Put your data into our student loan refinance calculator to see your potential savings. Our calculator has options for fixed and variable interests and loan terms of 5, 7, 10, 15, or even 20-year terms so you can see how your choices affect your monthly and lifetime payment*.
- Get prequalified – You can get prequalified and receive personalized rates in just a few minutes without it affecting your credit score.
- Gather your documents and apply – As mentioned, the application is 100% online, easy, and free. When refinancing with ELFI, you are paired with a personal loan advisor who will guide you through every step of the process. The Personal Loan Advisor who speak with at the beginning of the student loan refinancing process is the same person you’ll speak with at the end, which is nice because you won’t find yourself repeating information or prior discussions.
What to Do About Other Debt and Expenses
If you’re like many Americans, student loan debt may not be the only debt you are currently paying off. A whopping 80% of Americans are currently in debt, according to a report from The Pew Charitable Trusts. Here are a few ways you can pay off your debt more quickly or more efficiently.
- Refinance Your Debt – Similar to refinancing student loans, you should look for opportunities to refinance any of your other debt. For example, if you have a mortgage, refinancing could save you thousands of dollars over the life of your loan. Auto loans can also be good candidates for refinancing.
- Call Your Credit Card Companies – A reduction in the interest rates on your credit cards can make a big difference in how quickly you can pay down debt. A simple, polite phone call to your credit card companies requesting an interest rate reduction can sometimes be all that it takes. You have nothing to lose (except a few minutes), and the payoff can make a major difference in your monthly budget.
- Explore Medical Debt Options – Approximately 66.5% of Americans who file for bankruptcy due so because of medical bills. There are options to get this debt under control, but it will take some leg work. NerdWallet has a number of good tips for how to negotiate down your medical debt or develop a payment plan that works for your budget.
Typically, when paying off debt, it’s wise to start with the loan with the highest interest, as that will save you the most money in the long run. Once you have reduced your interest rates as much as possible, take stock of all of your existing debt payments and their monthly costs, and develop a plan. With any of the money you saved, you can start a separate savings account for your growing family.
Children Are Priceless, So Don’t Let Debt Stop You
It may sound cliché, but there are things in life that are just priceless. For many people, the love and joy a child can bring to life are worth more than any spreadsheet will tell you. If you are currently working towards paying off debt, don’t let the goal of being debt-free trump your desire to start a family. There simply may never be a perfect time. Plus, with a little planning, it’s entirely possible to start a family and still work on your financial goals.
Good luck to all of our current and future parents out there – you got this!
*Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions, The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.
1Average savings calculations are based on information provided by SouthEast Bank/Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon several factors.
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