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Dec 19 2011 12:00AM


I am a single parent who is currently paying off a loan. What’s the best way to save money so I can return to school?


“Congratulations on planning for school...I know it must be difficult with a loan and your obligations for your family, but it's great you are coming up with a plan,” said FPA member Robert Schmansky, CFP®, ChFC.

“As a planner, I would want to start with getting a handle on what the costs of your plans for school are, then investigate all of the options for saving, and finally see if there are other ways to finance school if saving by itself proved to be too difficult.

“For example, if you planned on starting school next year, and it was a two-year program that would cost $10,000. Then, it's worth looking at the available programs in the area and possibly online classes to see if there are lower cost options, or if some courses could be transferred in from a lower cost school.

“If you need to reduce your current loan payments and if the loan is a past student loan, you might also look at options to cut down its current payment. If it is a subsidized Stafford loan, you may be able to qualify for a deferment where the interest does not grow; one of the possible ways to qualify for a deferment is when you are in school at least halftime at an eligible program.

“I would recommend first trying to get a handle on knowing what you currently spend. A great tool for this is Mint.com, which can keep track of your bank purchases and categorize them for you. You can then look at reports on your income and expenses and see if there's room to save.

“Then, try putting aside an amount you know you can do for a month or two. Have it automatically transfer from your checking to savings, like you were paying a bill. If you find any extra money to save in your budget, try to increase that amount.

“Keep in mind that you may be able to qualify for loans for school, and you should also talk to the school about any possibilities for scholarships or other tuition assistance. When I reviewed options at schools, there were often programs that sought to help women in your situation with costs. Under new loan guidelines, the loan repayments can be capped at 10 percent of your discretionary income under what is known as an Income-Based Repayment Plan. This means that federal loan repayments shouldn't ever take up too much of your monthly budget. If it will help increase your income, a loan may be another option to use in combination with a savings plan.”

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