How to help your college-bound child with student loans

The time is finally here: college season. While it’s a time of great excitement, it can also come with challenges. College costs have been steadily rising and paying for it has become more complex. For many, student loans are a necessary part of the puzzle. As a parent, you might be wondering how you can help your child as they’re poised to leave the nest. Here are some tips for helping your student.

Do not jeopardize your own financial situation

First things first — beyond student loans, there are many options available to you and your student to help pay for college. Scholarships, grants, and work study programs are all potential funding sources to consider before turning to student loans.

If there’s still a gap, it may be tempting to dip into your retirement fund or personal savings to fund this great opportunity. Parenting is indeed full of sacrifices, but it's important to prioritize your own financial situation, given just how many other opportunities you may be able to take advantage of to pay for college.

Help them understand the big picture

When it comes to student loans, the many options and terms can be confusing and create important questions for your student:

• What’s the difference between federal and private student loans?
• What’s the right interest rate and repayment plan for me?
• What’s a fixed or variable interest rate?
• How much do I need and how much can I borrow?
• When should I apply for student loans and how do I do it?

With so much to consider, it can be a huge help to your child simply to be involved, help them navigate the process, and understand the options. Paying for college can be an overwhelming and emotional journey and your student will likely need your guidance and support.

When it comes to student loans, start by exploring federal student loans, such as Federal Direct Subsidized and/or Federal Direct Unsubsidized loans. These often have lower fixed interest rates than private student loans, however they also may have stricter loan limits and an origination fee. Private student loans can be considered to help fill in the remaining gaps between the cost of college and other financial aid, such as federal student loans.

For private student loans, consider cosigning

If your student is considering private student loans, you should know that cosigning the loan could increase the chances of approval and getting a lower interest rate.

The application process for private student loans is credit-based, and college-bound students don’t often have a credit history yet. When you are added as a cosigner, your credit history and other factors are evaluated too, which could make it easier for the loan to be approved. At Citizens, 99% of undergrad student loans have cosigners.*

Before cosigning, you and your student should consider and discuss the pros and cons of cosigning their student loan. Because, after all, cosigning will make you jointly responsible for repaying the loan.

Make student loan payments while your student is still in college

With private student loans, there may be different repayment options to choose from, such as deferred, interest-only or immediate repayment. Generally, deferred repayment means that no payments are necessary while your student is still in college while interest-only and immediate repayment means making payments while still in school. Making in-school student loan payments could help lower the total loan cost in the long run compared to deferred repayment.

While it may not be feasible for some students to juggle in-school student loan payments and their studies, parents could consider making payments on their behalf while they’re in college. Make sure to choose a repayment plan that works for you and your family based on your financial situation. You can learn more about student loan repayment options here.

Match or split student loan payments

If you’d like to directly contribute to repayment, but not be responsible for the loan, you could simply match or split your student’s payments. It can help ease the burden for them while still teaching financial responsibility before they begin their careers. If matching payments results in additional payments on the loan beyond the monthly payment, it could help reduce the total interest repaid over the lifetime of the loan.

Give the gift of a loan payment

As you search for the perfect gift for holidays and birthdays, consider a practical one. Picking up the tab on a student loan payment can be a big relief, especially as they get older and begin to understand their finances better. After all, teaching them to understand finances better is the gift that keeps on giving. Be sure to check with a certified tax professional about a gift tax in your state.

Consider student loans for parents

If you want to take on more of the financial responsibility, you could look into student loans for parents. This would make you fully accountable for repayment. These are available from the federal government as well as private lenders. There are several options to consider, such as a federal Direct PLUS loan (also known as a parent PLUS loan), or private student loans for parents. Federal Direct PLUS loans have higher interest rates compared to other federal student loans and also have an origination fee. It’s worth it to do your homework to find out which option will be better for your situation.

Do what’s best for your family

Ultimately, you and your student will know what the best course of action is. Consult with your child and assess your family’s needs, and then make a plan.

College is an exciting time, and researching the best way to pay for it can make it even better. If you need more information, you can count on Citizens — we’ve been funding college journeys for over 40 years. With rate discounts and flexible repayment options, find the Citizens Student Loan™ that fits your life and budget.*