College isn’t getting cheaper. Unless you graduated recently, your child’s education will likely cost much more than yours did. In fact, tuition alone has tripled in the past 20 years. Room and board are rising even faster – at a higher rate than the cost of inflation. That’s why roughly 70% of students rely on education loans to pay for college. Here’s how you can help.
Maximize their federal financial aid.
To qualify for grants, work-study and federal student loans, your student must first submit the FAFSA. This requires providing their social security number, federal income tax returns and W-2s, bank statements, records of investments and records of untaxed income. If your child is a dependent, they’ll need your information as well. That’s a lot to ask of a teenager. Since you’re probably familiar with the process, help them to gather the needed documents and fill out the online application.
Also encourage your student to accept all federal financial aid available to them before applying for a private student loan. However, understand that it may not cover all of their education expenses. Download the College Cost Calculator at the bottom of this article to determine what you should budget for.
Consider applying for a parent student loan.
These loans are taken out by parents of dependent undergraduate students. The Parent PLUS loan can go toward expenses not covered by other federal student loans, such as your Expected Family Contribution, or what the government believes you can pay based on the information you provided on the FAFSA. However, the parent is the borrower, not the student, so it may not be your first choice if you already have student loans of your own.
Stay tuned, we’ve got a great parent loan option on the way!
Cosign their student loans.
When federal aid isn’t enough, private student loans are a good option for college financing. Both variable and fixed hybrid rates are available and the student is the primary borrower. Unlike Federal loans, private loans rely on a credit check so most teenagers do need a cosigner to qualify. That’s where you can help.
Since your credit is likely better than your student’s, cosigning may help them qualify the loan and for a lower rate. Additionally, adding a credit line may give your own score a modest boost if payments are made on time. We offer early cosigner release after 24 consecutive on-time payments have been made, provided your student meets the eligibility requirements on their own at that time. Keep in mind, by cosigning a loan, you’re agreeing to cover the balance if the borrower stops making payments. You know your child, so it’s up to you to determine if they’ll be responsible in repaying their loans.
Most parents are willing to do just about anything to help their children. When it comes to paying for college, that can be as easy as helping them secure their student loans. However, even the most involved parents should prioritize their own financial health first. After all, your student has their entire career to repay their loans while you only have a set number of years until retirement.