Accounting for Student Loans

March 20, 2008 · Filed Under Managing Credit/Debt Andy Hough

My student loans are messing up my monthly total of income and expenses. I don’t include my student loans as income because they aren’t income. Right now though some of my living expenses are being paid from my student loan surplus. When I pay back my student loan this will result in the surplus being counted as an expense twice. The easy way to avoid this would be to not use my student loans for anything except tuition but I can’t quite do that right now. I might be able to replace the money I used from the surplus when I receive my tax refund and tax rebate. If I did that then I would use all of my student loan surplus towards paying off my higher rate student loan. That would make my student loans just count as one expense and keep my accounting straight. I don’t think I’ve done a very good job of explaining this but if anyone can understand it and has any suggestions I would be happy to hear them.

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4 Responses to “Accounting for Student Loans”

Stngy1 on March 21st, 2008 2:09 am

We use Quicken, where you actually create a separate loan account, with a starting balance equaling the total loaned. Although we have, in actuality several loans, since the Government considers them to be one (in terms of payments) we simply keep adding to the [negative] balance of the one loan account with each new chunk of money. Remember this account will have a NEGATIVE balance.
There are “transfers” from that loan account to wherever you are moving the money: straight to the school, your checking account, whatever. Payments are the reverse, where the money is transfered/EFT’d back into the loan account as a positive amount. It is an account because you have to keep a record of the flow of monies in and out of it, and .of course, the bank/govt. considers it as such. Any interest would be “added” as a negative to the total negative balance of the loan, just as payments would be entered as a positive, so that you move that much closer to ZERO.
In your example you would have “transfered” the money from the loan account to your checking(?) account to then be used as you saw fit. To use loan #2 to pay loan #1, you are in reality, moving the money from the loan #2 account into your checking account, then paying loan #1 from there. If you are paying back into the same loan, you are doing just that, making a payment, even if you were using the money you previously “transfered” into your checking account.
Hope that helps. Its hard to explain in words. Have fun & good luck!
Stngy1 on March 21st, 2008 2:50 am

I forgot one other thing, you might also choose to record loan monies that end up in your checking acct as a DEPOSIT, but you’re right, its definitely not income. Quicken, however, distinguishes between transfers (movements of funds from one account to another) as different from deposits (money coming into your financial kingdom from outside) and expenses (money leaving forever). Just remember your loan IS an account, and part of your financial kingdom, until you’ve paid it off.
Tight Fisted Miser on March 21st, 2008 3:50 pm

Thanks for the info Stngy1. I just use a spreadsheet program for my accounting. It doesn’t really have the details of Quicken but it works for my current purposes.
Stngy1 on March 21st, 2008 5:17 pm

In its simplest use Quicken is really just a glorified combination spreadsheet and database, so you could create the same scenario with a little thought and experimentation. I’m sure you’ll figure out what works for you.