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How a Pregnancy and Kids Impact Student Loan Payments

Student loans make it a challenge to add to your family, but there are many resources for parents trying to manage student debt and have children.

Written By: Michael P. Lux, Esq.

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Student loans can present significant challenges for young families.

Some families choose to postpone having children due to the burden of student debt. Others discover that student loans are a major hurdle when raising children.

Fortunately, a variety of student loan resources and strategies exist specifically to assist parents and those expecting children.

Federal Student Loan Management for Parents

Having children can lead to lower monthly payments on federal student loans for many borrowers, with some even qualifying for extra relief.

There are many options available. However, finding the right strategy for your specific situation requires some planning.

Although specific programs exist for borrowers on parental leave or those who are working parents, most will just need to tweak their existing student loan strategy.

Help Specifically for New and Expectant Parents (Parental Leave and Working Mother Deferments)

Assistance for working mothers and parents on maternity leave might sound promising, but the resource is so limited that we almost didn’t include it in this guide.

For starters, both of these programs are available only to borrowers who took out their first student loan before July 1, 1993. Additionally, the aid only applies to certain types of federal loans. Finally, both programs only offer deferments to borrowers, not forgiveness or reduction.

If you are interested in learning more about the Parental Leave and Working Mother Deferments, this page offers more details.

Fortunately, there are better options available to new and expectant parents. While not designed specifically for parents, these alternatives can provide far better support.

Lower Monthly Payments on Income-Driven Repayment Plans Like IBR, PAYE, and REPAYE

The income-driven repayment (IDR) plans are one of the biggest perks of having federal student loans, especially for expanding families.

One major advantage of IDR is the potential for lower monthly payments. As your household size increases, your discretionary income decreases, leading to reduced required payments. In short, having kids can mean lower monthly student loan bills.

To explore how having a larger family could lower your student loan payments, check out the Department of Education’s Loan Simulator. This tool allows borrowers to adjust income and family size to see the impact on monthly payments.

Requesting a Monthly Payment Change During Pregnancy

Another advantage of IDR for young families is that monthly payment recalculations can occur as soon as a family is expecting a baby. This is helpful for parents with a newborn because they don’t need to put IDR payment recalculation at the top of their to-do list immediately after their child’s birth.

The IDR plan request form says that borrowers who expect kids can immediately adjust their family size:

Thus, as soon as a pregnancy occurs, it is often a good idea to request a lower monthly payment on your IBR, PAYE, or REPAYE plan.

The Math on Filing Separately May Change

Married couples deciding whether to file taxes jointly or separately will have shifting calculations as their families expand.

Married borrowers enrolled in the Income-Driven Repayment (IDR) or Pay As You Earn (PAYE) plan have the option to exclude their spouse’s income from monthly payment calculations if they file their taxes separately. As your family grows, the benefit to filing separately may also increase. This rule also applies to couples who both have student loans.

Parents will need to weigh the benefits of lower monthly payments against the potentially higher tax bill from filing separately. This math makes tax season more complicated, but it is worth exploring as potential savings can be significant.

Private Loan Planning for Borrowers with a Kid on the Way

Private student loans are far less flexible than federal loans. This lack of flexibility certainly extends to new parents. Each private loan is different, but the vast majority of lenders offer very little assistance to young families.

However, there are a couple of strategies that could potentially make life with private student loans slightly more manageable.

Getting Help from Lenders During Paternity Leave

It’s extremely rare for lenders to provide a specific forbearance or deferment option for paternity leave.

However, many private loans do offer hardship deferment or forbearance. If you are on an unpaid or reduced pay paternity leave, you may be eligible for a temporary break in payments.

Keep in mind that interest will continue to accrue during any payment pause. Thus, borrowers should only explore this option if a temporary break from payments is the only help they need.

Lowering Monthly Payments

Some private student loans offer borrowers the option to extend the loan’s repayment length. For instance, if your current repayment plan is set to repay your loan in five years, switching to a ten-year repayment plan could significantly reduce your monthly payments.

Another strategy to consider a private student loan refinance. Depending on your credit score and current loan terms, you may be able to refinance and get a significantly lower interest rate and monthly payment.

Sherpa Tip: A successful refinance usually requires a strong credit score and debt-to-income ratio.

If you are a parent who is about to leave the workforce or take a lower-paying job, it is better to refinance before this change happens.

Other Financial Considerations

As you consider the impact of student debt, it is also important to remember that other forms of financial relief are available to parents.

High costs like daycare and medical bills make raising a child expensive, but other resources are available beyond student loan help.

Tax breaks

Tax season can help reduce the financial strain of having children.

Parents may qualify for a tax credit for each child and a child care credit for daycare and babysitting costs.

The list of tax breaks for parents is quite extensive and can provide much-needed budget relief.

Building Up Your Emergency Fund

Another important financial consideration for new and expectant parents is their emergency fund.

For example, an emergency fund for a family of four should be larger than the emergency fund for a single person.

If you are planning your finances in advance of having children, building up the emergency fund is a great idea.

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About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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