How to pay off parent loans more quickly

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Nick Mann

By Nick Mann

March 7, 2023

Today’s parents are borrowing record high student loans to cover their children’s college costs. In turn, many are struggling to repay the large balances, forcing them into longer repayment terms. Following a few key strategies should help them repay their student loans more quickly.

A spike in average annual borrowing

Parents are borrowing far more than they used to. Average annual borrowing was just $5,200 in 1990, but climbed all the way to $16,100 in 2014, according to the Brookings Institution.

A greater percentage of parents are also racking up big balances. Only 4.3 percent of parents had student loan debts over $50,000 in 2000. But that number jumped to 25.4 percent in 2014. Even the percentage of parents with six-figure student loan debt has skyrocketed, increasing from 0.4 percent of parents in 2000 to 8.8 percent in 2014.

More money borrowed means more money owed, putting many parents in a difficult financial situation.

Strategies to help parents pay off student loan debt

What can parents who are struggling to repay student loan debt do about it? What’s some practical advice for speeding up the process?

Asking the child to repay at least a portion of the debt is a good starting point. After all, they benefited from the loan and got an education. Ideally, the money they earn from their job after obtaining their degree will justify the loan. Their contributions can hasten the repayment process and ease the financial pressure on their parents. So, striking an agreement where the child pays part of the parent loans each month can be a tremendous help.

Changing the repayment plan can have an equally big impact. Making higher monthly payments allows parents to pay off the student loan debt more quickly.

For instance, an extended repayment plan offers lower monthly payments, but they’re spaced out over a longer period of time. This also increases the total cost of the loan. On the other hand, a 10-year repayment plan has higher monthly payments and saves more interest over the life of the loan. This can mean the difference between paying off debt in 10 years versus 25.

However, it’s important to have a clear snapshot of cash flow before agreeing to a larger monthly payment. Using a spreadsheet or budgeting tool will provide an overview and let parents know exactly how much they can afford to pay each month.

Use our Loan Prepayment Calculator  to see how much you can save and how much sooner you can pay off your loans by making extra payments. 

Refinancing is always an option and can save money by lowering the interest rate. There are two main options here. One is for parents to refinance student loans in their name. The other is two refinance it in the child’s name. To be eligible, borrowers must usually have good credit and comfortably afford all expenses and debt payments. Refinancing federal student loans means a loss in many benefits – including the potential for loan forgiveness, generous deferment options, and income-driven repayment plans.

Use our Loan Refinancing Calculator  to learn you how much you can lower your monthly loan payments or total payments by refinancing your student loans into a new loan with a new interest rate and new repayment term.

Accelerating repayment of the loans with the highest interest rate is also advantageous. Parents should target those loans over the ones with lower interest rates and make bigger payments whenever possible. Funneling additional money into the higher interest loans reduces the loan length and expedites repayment.

Parent loan forgiveness is yet another option that some borrowers may be eligible for. Under this arrangement, all federal student loan debt is forgiven after 120 qualifying payments (roughly 10 years) have been made. To qualify, a parent must work in a career that serves the public good and/or serve as a full-time volunteer for the Peace Corps or AmeriCorps.

See also: Complete Guide to Parent Loans

Other ideas

But that’s just the tip of the iceberg. Some other ideas include making lifestyle changes like:

  • Taking advantage of windfalls such as a pay raise, inheritance, tax refunds, stock spikes, and so on to get ahead on payments.  
  • Reducing spending on non-essentials like cable, costly cell phone plans, paid entertainment and dining at expensive restaurants.
  • Minimizing home energy use.

Others revolve around creating extra streams of income and leveraging existing assets including:

  • Asking an employer for a raise.
  • Seeing if an employer offers a loan repayment assistance program (LRAP).
  • Selling unused belongings on Craigslist, Amazon or Ebay.
  • Starting a side hustle like teaching online, driving for Uber or Lyft, tutoring, etc.
  • Renting a spare room, such as the student’s bedroom, on Airbnb or VRBO.



Consider the proximity of retirement

Retirement is an additional factor to consider. Parents should aim to have all of their debts completely paid off before retiring. Otherwise, the loan payments can become a drain on their retirement cash flow, especially if there’s a mortgage involved.

If the parent’s total student loan debt is less than the parent’s annual income, they should be able to repay their parent loans in ten years or less. Parents should be aware that the average retirement age was 63 in 2015. If retirement is only five years away, they should borrow half as much.

A good place to start:

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