Can You Pay Back Your Student Loans AND Buy a House?

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Want to buy a home, but feel held back by the financial burden of student loan repayment?


You're not alone. According to a recent piece from the Boston Globe, 71% of people with student loans who don't own a home reported that their debt prevented them from buying property. About half of those people said their student loans would probably delay their ability to do so by at least five years.

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But student loans don't have the be the main thing that keeps you from buying a home. Here are some ideas on how to save up for a house while still making progress on paying down your student loan balance.


Organize Your Finances

You can't make the most of your money if you don't know what it's doing right now. Getting organized will help you use the money you do have in the most efficient way possible.


Track all your income and all your spending. Create a budget based on your living expenses and other needs. Are there obvious places to cut back (like the expensive boutique gym that costs you $200 per month when a membership to a lower-frills place down the street costs $60)?

Look at happens with your finances each month and identify costs you can cut, expenses you can eliminate, and ways to cut back on your spending. You don't need to sacrifice everything you enjoy -- but you do need to prioritize what's important.


If you want to save for a home while paying down student loans, you may need to give up a few discretionary purchases to make room for your bigger goals.

Choose a Repayment Strategy

Now you know how much money comes in, goes out, and is left over each month. The next step: Choose a repayment strategy and determine how much you'll put toward your student loan debt each month.


There's no one right way to do this. The goal here is to create a plan and stick to it. This will keep you on track and making progress toward achieving what you want: debt freedom and a home down payment.

Here are some of your options:

● Debt snowball: Start with your lowest loan balance, and focus on paying that off. Make minimum payments on all other debts, but throw all your extra cash at the lowest balance loan until it's paid off. Then take the payment you made on that loan, combine it with the minimum payment you made on the loan with the second-highest balance, and pay that amount until that second loan is repaid. Keep going until all loan balances are gone.


● Debt avalanche: Start with your highest-interest rate loan first, and then follow the same steps outlined above. This is the way to go if you want to save the most money on your debt repayment, as knocking out debts in order of highest-interest rate first will cost you the least.

● Repayment program: If you have federal loans, you may be able to take advantage of repayment programs that make it easier to repay your loans each month -- and may allow you to have portions of the balance forgiven entirely.


You could also look at consolidating debt or refinancing your loans. This can help you change your monthly payment amount so it's easier for you to save and repay debt at the same time. Or it could help you save money over time if you can get a lower interest rate.

Set a Savings Goal

Once your debt repayment strategy is in place, you can create a savings goal for the home you want to buy. Start by doing a little research and asking questions like:


● Where do I want to live?

● What kind of house do I want to buy?

● When do I want to buy a house?

When you have a clearer picture of what you want, you can look at how much that might cost. Remember, best practice is to put down 20% of a home's purchase price. That means if the home you want to buy costs $200,000, you need to save $40,000 to put down on the property.


That sounds like a big scary number, but saving for a home is a long process. Setting up a plan to save money over five years isn't unreasonable. And in fact, the longer your timeline the more options you have to maximize your savings. (More on that in a moment.)

Using the five year timeline as an example, that means you need to save $8,000 per year or $667 per month to reach your home savings goal.

Maximize What You Can Save

If that per month savings number still sounds scary, you may need to adjust your expectations for your first home. It may take you longer to save -- or you may need to look at purchasing a less expensive home.


But you can also explore ways to maximize the money you save. If you know you won't need the savings for at least five years, consider saving your money in a brokerage account (sort of like a savings account with access to stocks and bonds brokers). This allows you to invest your money and help it grow more than it would if you only stuck it in a savings account.

Keep in mind all investments come with risk. Your money is not guaranteed to grow and you could lose money in the market. But historically, the stock market rises in value. Even if your investment account takes a hit, you can likely recoup the money if you're willing to *leave it in the account *long enough for the market to recover and rise again.

Earn More!

If you're still struggling to figure out how to save for a home and pay down student loans at the same time, you may have a simple cash flow issue. In other words, your income doesn't allow you to pay down your loans and save what you want at the same time.

The fix? Earn more money. And yes, it is possible! Here are a few ways to make it happen:

● Negotiate a raise in your current job.

● Look for a new and higher-paying position.

● Take on extra hours or look for opportunities to earn overtime or holiday pay.

● Consider a second, part-time job doing something you enjoy (so it feels less like work, and more like something fun that you get paid to do).

● Freelance or consult in your free time

Get Help from a Pro

Obviously, this is a lot for you to think through and plan for. The hardest part of saving for a home while paying down student loans isn't necessarily taking the necessary steps. It's keeping yourself motivated and holding yourself accountable.

This is where getting some help can make a big impact on your success. Consider working with a financial planner who is fee-only and willing to work as a fiduciary (that means they uphold an ethical standard to put your interests ahead of all others — and no, not all advisors are fiduciaries!).

XY Planning Network is a good resource to look into, because financial planners in the organization charge a flat monthly fee to work with them. Fees range from $50 to $200 per month, so you can hire a pro at a price point that makes sense for your budget.