3 Things Your Student Should Know About Loans
Posted 23 Jun, 2009
With financial strain hitting families from coast to coast, it is no wonder that more students are turning to student loans to help cover the cost of college, but does your child know all that a loan entails?
Here are a few things your student should understand about student loans before he or she starts borrowing.
1. It’s MUCH Better to Avoid Debt.
If you think the cost of college is daunting to a parent, imagine being eighteen years old, making minimum wage, heading for your first year of independence, and being faced with a private college bill of $30,000 per year. Many students panic and borrow the maximum amount of student loans, but that may not be the best course.
Remind your child that they can bring in money from other sources that won’t put them in debt, like jobs, scholarships, and grants. Take the “every little bit helps” philosophy–it may not seem like much now, but the $100 paycheck they can put towards college is $100 less they’ll be in debt when they graduate.
2. Start With Federal Loans.
There are a plethora of private student loan companies out there who are campaigning to get students’ business. They market any way they can, sometimes even making their private loans to appear to be federal loans by sending letters with official government-looking seals.
Private loans are simply not nearly as consumer-friendly as federal student loans such as the Perkins or Stafford loan. They also tend to have higher interest rates which are variable instead of fixed. The cost of borrowing may end up being significantly more in the long run. So, the lesson is: Start with federal loans, and consider private loans ONLY as a last ditch option!
3. Traditional Student Loans are the Student’s Responsibility.
Though parents have the option of taking out a PLUS loan or other type of loan, traditional federal student loans are borrowed in the student’s name, not the parent’s. So even if a parent or grandparent offers to pay off the loans, should something happen that prevents that person from paying, the student is the person responsible for paying it off.
Going over this type of information could tend to make your student feel nervous or overwhelmed, so be sure to reassure him or her that you will work together to make important financial decisions. And you still have time to help your child start preparing for the real world. Try reviewing my article about 5 Ways to Raise More Financially Savvy Kids to get started.
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
image by woodsy
Subscribe in a reader
Subscribe by Email
Related Posts
With financial strain hitting families from coast to coast, it is no wonder that more students are turning to student loans to help cover the cost of college, but does your child know all that a loan entails?
Here are a few things your student should understand about student loans before he or she starts borrowing.
1. It’s MUCH Better to Avoid Debt.
If you think the cost of college is daunting to a parent, imagine being eighteen years old, making minimum wage, heading for your first year of independence, and being faced with a private college bill of $30,000 per year. Many students panic and borrow the maximum amount of student loans, but that may not be the best course.
Remind your child that they can bring in money from other sources that won’t put them in debt, like jobs, scholarships, and grants. Take the “every little bit helps” philosophy–it may not seem like much now, but the $100 paycheck they can put towards college is $100 less they’ll be in debt when they graduate.
2. Start With Federal Loans.
There are a plethora of private student loan companies out there who are campaigning to get students’ business. They market any way they can, sometimes even making their private loans to appear to be federal loans by sending letters with official government-looking seals.
Private loans are simply not nearly as consumer-friendly as federal student loans such as the Perkins or Stafford loan. They also tend to have higher interest rates which are variable instead of fixed. The cost of borrowing may end up being significantly more in the long run. So, the lesson is: Start with federal loans, and consider private loans ONLY as a last ditch option!
3. Traditional Student Loans are the Student’s Responsibility.
Though parents have the option of taking out a PLUS loan or other type of loan, traditional federal student loans are borrowed in the student’s name, not the parent’s. So even if a parent or grandparent offers to pay off the loans, should something happen that prevents that person from paying, the student is the person responsible for paying it off.
Going over this type of information could tend to make your student feel nervous or overwhelmed, so be sure to reassure him or her that you will work together to make important financial decisions. And you still have time to help your child start preparing for the real world. Try reviewing my article about 5 Ways to Raise More Financially Savvy Kids to get started.
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
image by woodsy
Subscribe in a reader
Subscribe by Email
Leave a Reply