One of the decisions you have to make when you have student loans is how to pay them off. Are you going to pay them off quickly after school? Or are you going to go for the lowest monthly payment you can get?
There are pluses and minuses to both approaches. But I would like you to take a big picture look at what the ramifications might be on the family legacy you pass down to your children.
Let’s play out an example where you are a parent. For this example, we’ll assume you were unable to save money for your child’s college because you were paying on your own student loans over the 20 years since you graduated from college.
Your 18 year old son is going to use student loans to attend school.
Everything works out good in school and he graduates, gets a good job, qualifies for the new Pay As You Earn plan and begins making his monthly payments on his student loans (meaning he is signing up to a 20+ year repayment plan with the possibility of debt forgiveness). Life rolls on and he falls in love, gets married to a wonderful woman, and has children. He continues making the monthly payments on his student loans as well as paying for all the other costs of raising a family.
At this point, he is in his early 30s and his children are between the ages of one and four. He has another fifteen or so years left on his student loans. That means he will still be making payments on his student loans even as your grandchildren reach their teenage years. (And that’s before considering how much student debt his family may be carrying now. It’s possible his wife brought student loans into their marriage as well. The majority of students come out of school with hefty student loans so most marriages include a combining of student loan debt.)
Monthly Payments Make Saving for College Difficult
With one or both of them still in debt on their student loans, together with the other costs of raising a family, having a couple cars, and buying a house, your son is unlikely to be in a position to save money for your grandchildren’s college education.
Chances are, when it’s time for your grandchildren to go to college, your son won’t have much money saved for his children’s college education. Which means your grandchildren will have to take out student loans so they can go to school – just like he did.
Your grandchildren will begin their young lives in student debt just about the time your son’s student debt is finally paid off.
Picture that in your mind for just a minute.
Your grandchildren are starting their young adult life out the very same way your son did – in debt.
Look What Just Happened
The student debt cycle has now been handed down to your son and to your grandkids. And they will probably hand it down to their kids as well. It’s very difficult to break the debt cycle once it becomes generational.
You don’t want to leave a legacy like that, do you?
Paying your student loans off quickly is the ticket to financial freedom – for you and your children.