Everyone wants what’s best for their children. As parents, your goals in life are almost always associated with helping your kids reach their full potential. That is often correlated with a bachelor’s degree. If you’re someone who went to college, then it makes sense for you to expect your kids to do the same and even better.
However, there’s something that no one expected. That was the rising prices of education. Only a select few families can afford to pay for the education of their kids with their savings. At the moment, there are more than four million people that owe money to the Parent Plus program.
This equals over a hundred billion dollars in loans. If you’re someone that has started this program, there are a few things to know. First of all, taking on student loans in your later years can have serious ramifications. This can influence a lot of things in your life. Visit this page for additional info.
First of all, it can mess with your ability to obtain a house. Additionally, it can impact the age when you retire. That’s why in some cases, it makes sense to refinance. This is an option where you pay off the existing loan by taking on a new one.
It doesn’t make sense right at the start, but there’s a hidden bonus. The bonus is that you can change the terms. Changing the terms almost always includes prolonging the repayment period. This is great because you decrease your monthly payments, and you have more money in the short term. Having more room to invest in something that will positively benefit you in the future. Also, a longer repayment period means that your kids can start working and start giving back.
The main advantage that presents itself is getting a lower interest rate. If you’ve been paying your bills on time and maintaining a great credit score, then this might be one of your best investment strategies. Let’s look at an example.
Imagine that you owe 100 000 dollars to the bank with an interest rate that’s 10 percent over 10 years. This means that you would have to pay around 160 000 at the end of that period. However, if you’ve been taking careful steps to improve your credit score, then the bank would give you another option.
Refinancing for a 5 percent interest would drop your final payment to 127 000 dollars. This means that you would save 33 000 dollars in total. That’s a lot of money that would rather be sitting in your investment portfolio or in your retirement account. Making smart decisions is one of the keys to obtaining financial freedom and wealth in your retirement years.
Another advantage to looking forward to is that you would need to pay a single rate each month. If you have more than one child, then taking a student loan for each of them would have different terms and conditions, as well as minimal payments and due dates. Go to this link for more info https://thehill.com/opinion/education/580236-theres-a-fair-and-humane-way-to-restart-student-loan-repayments
This can cause a lot of clutter in your mind. Making things simple is much easier on your head and on your wallet. If they’re all federal loans, then you can consolidate them instead of refinancing. That can prove to be the better option since you can keep all the added benefits.
When you have to go to one service with a single due date and one payment, your life will be simplified. Finally, if you decide on a longer term just to have more money at the moment, then you can live life to the fullest. You can go on a vacation and not worry about all those payments that are waiting for you at home. Life is a grind, but that doesn’t mean that you can’t take time to enjoy yourself.
The main drawback happens when you don’t know how to refinance Parent Plus loans and decide on a longer repayment period instead of a shorter one. Banks have a subtle way of making money. They do it by charging you interest for the cash they give you upfront.
Since the dollar is a fiat currency, they’re the ones who are creating it out of thin air, and then you need to repay it over the course of a number of years. Since banks have made a lot of mistakes in the past, they’ve now included inflation-resistant loans, which means that you can’t pay everything off in a couple of days if hyperinflation comes around.
Another disadvantage is that you may not be eligible for the loan forgiveness program. As soon as you decide to refinance, this benefit will no longer apply to your situation. The same thing is true if your kids decide to go for a private option. However, if you’re feeling overwhelmed by your current situation, there’s no reason not to ask a professional and find out more.