Plan for College Loans with Your Child
Spend time exploring college financial aid options together before making a decision
A large part of the college search process is determining how much your child's education will cost. You will spend a lot of time exploring college financial aid offerings, additional grants and scholarships, and looking for other ways to supplement the cost of her education. During this process you're likely to come across several student loan options - but how do you know which one is best? Should you do all the borrowing, or let her take out her own loans? Sit down together to get an idea of college costs and college loan options.
Who will be responsible for college loans?
For most students, college loans are their first major debt, and it's important they fully understand the responsibilities that accompany student loan borrowing. Discuss who will be the primary borrower (you or your child), how repayment will work, and how the interest rate will affect the total amount owed. It is very common for a parent to co-sign private student loans. But the responsibility of repayment still falls to the student. Making consistent, timely payments will help your child improve his or her credit score for future borrowing.
Look for private student loans with a co-signer release option that shifts full responsibility to the primary borrower after she has made a set number of consecutive payments. This alleviates the financial burden placed on you, and helps her take more responsibility for her debt.
Work together to meet college financial aid deadlines
Make sure you're aware of college financial aid deadlines and important dates. File the Free Application for Federal Student Aid (FAFSA) in January of your child's senior year. This application will help you apply for federal college loans, and tell the schools your child's applying to what your expected family contribution is so they can create financial aid packages for you. You should receive these award letters in March in time to incorporate them into your financial planning and make a final decision on a school in April.