By the time you graduate from university, you’ll be biting at the bit to get started on your life in the post-university world. That will include having your own place to live – perhaps even in a distant city – and having all the trappings that go along with being an independent adult. But if you have student loans, particularly large ones, you might consider moving back home after graduation to pay them off.
A One time Opportunity To Get Your Student Loans Under Control
Many graduates set off to live on their own immediately upon graduation. But a few years later, they find themselves back at their parents door asking if they can have their old room back. Debt is often the reason, especially student loan debt. It’s tough enough to get established in life, let alone trying to do it when you have tens of thousands of dollars in student loan debt that you owe.
But the post-graduation period will be a unique time in your life. It will represent a one-time opportunity to get your student loans under control before going out into the real world where doing so could be close to impossible.
The time after graduation will present an opportunity to move back in with your family to improve your finances before taking the plunge into independent living. If this opportunity exists, seriously consider taking advantage of it now. As hard as it may be to move back in with your family after living at university for four or more years, it will be even more difficult if you have to do it after living on your own for a few years.
Generally speaking, the best time to take care of problem – and that’s what student loans can be – is as soon as possible. Moving back home may be the best way to make remove student loans as an obstacle in your life.
It Won’t Get Any Better From Here
Though optimism is a natural state of youth, the financial realities of adult life can be difficult. If you take your own apartment, you’ll not only have rent to pay, but also utilities and insurance. And then you’ll need a car, and that may require a loan and a monthly payment, and still more insurance. And then there’s food, gas, and entertainment expenses. You may even hope to take an annual summer vacation.
Now add paying off your student loans to that pile of financial obligations.
No matter how optimistic you may be at graduation, all of that will represent an enormous financial obligation, one that you may not be able to afford. The point is, independence has a price – a literal one that’s measured in dollars. There simply may not be enough of them (dollars) left over after paying living expenses to payoff your student loan debts in a relatively short amount of time. You may find that the same debts that you’re carrying in your early 20s follow you well in to your 30s.
If you have an opportunity to interrupt the process – such as by living at home after graduation – you may find yourself able to payoff your student loans in just two or three years. Once you do, you’ll have more money available to create that wonderful life you’ve been planning.
The Best Living Expense Package You Can Get
Moving back in with the folks won’t be easy, but it will be the best financial deal you’ll ever get. You can settle on a relatively low amount of rent or board to pay your parents, that way you can dedicate the rest of your income to paying off your student loans. Though living on your own may not permit you to make any more than the minimum monthly payments on your student loans, living at home may give you the financial freedom you need to pay the loans off early. You’ll do that better living home than just about anyplace else.
Related: Repaying Student Loans Part 3 of 3
You may even decide that you also want to pay off some other debts, and maybe even get at least an emergency fund saved up before striking out on your own. While living at home will delay your life some, it will give you a much better start. Supporting yourself can be difficult enough if you don’t have loans to pay. If you do, it can be a certified financial nightmare, forcing you to make serious compromises at every turn.
Make Sure You Actually Pay Off Your Loans
If you move home after graduation, it will be extremely important that you budget your money for the intended purpose of paying off your loans. Since you’ll be living at home, you’ll need only a minimal amount of money to cover your living expenses. The rest can go either into paying off debt, or building up savings. Make sure that is exactly what happens.
Some university graduates move back home with family, get comfortable in old routines, and lose track of bigger picture goals. Instead of using the time with family to improve their finances, they instead use the lower cost of living to free up their income to pay for lifestyle preferences. Instead of paying off debt and saving up money, they go to restaurants, concerts, multiple vacations, and decorate their lives with expensive clothing and cars.
That will be a completely wasted effort.
Let’s say that you graduate with $50,000 in student loans. If you move out on your own right after graduation, you’ll probably do little more than make the minimum monthly payments, even if you‘re making say, $40,000 per year.
But let’s say that you decide to spend the first few years after graduation with your family, so that you can payoff your student loan debt. You’re earning $3,333 per month ($40,000 divided by 12 months), or maybe $2,500 after income taxes, and paying $500 of that each month to your family for room and board. That leaves you with $2,000 for everything else.
If you keep your other living expenses to say $600 per month, that will leave you $1,400 per month to dedicate to your student loans. That comes to $16,800 per year – that means you will be able to pay your student loans off completely in about three years.
Do you think that would give you a good running start when you go out on your own for good?