College-related costs are at an all-time high, and while many parents harbor concerns about the expense, they value the education their child is receiving.
That’s according to the April 2024 College Ave survey. The survey found that while 89% of parents of four-year college students believe a college degree is important for their child’s future, 78% agree that paying for college is stressful.
It’s critical to understand the ins and outs of borrowing for college before taking out a loan. If you believe your family will take this path, here’s everything you need to know:
- Exhaust other options. Many experts agree that private loans only make sense once other financial aid options are exhausted. After filing the FAFSA (Free Application for Federal Student Aid), you’ll receive a financial aid package from each school, which may include scholarships, grants and federal student loans. If your selected school is one of the 400 institutions that requires the CSS profile, submit that application, too to qualify for institutional aid. And of course, don’t forget to apply to private scholarships to access funds that don’t need to be repaid.
- Do the math. Federal student loans in the student’s name offer unique benefits, so if you do need to borrow, start there. If you decide that a private student loan or private parent loan is also right for your family, borrow only the minimum amount needed to save over the life of the loan. This is a good time to explore additional avenues for reducing your financing needs, such as renting textbooks, and buying groceries versus paying into the school meal plan.
- Understand loan costs. Unlike federal loans, which have fixed interest rates for all borrowers, private student loans offer a choice of fixed or variable interest rates. Shop around for a lender that doesn’t charge origination fees, and learn the difference between fixed and variable interest rates.
- Compare lender repayment options. Another factor to consider when shopping for a lender is repayment terms. Some lenders, like College Ave, let borrowers choose how long they want to repay their loan, and whether to start making payments immediately or defer until after graduation. The important thing is to select a loan with budget-friendly terms and a monthly payment you can live with.
- Apply with a cosigner. Private student loan lenders look at income and credit history to determine a student’s ability to repay the loan. If approved, their credit history also impacts the interest rate they’re offered. Many college students don’t have an established credit history or sufficient income and may not get approved for a private loan on their own. Your student can improve their chances of getting approved and securing a lower interest rate by adding a cosigner to their loan application. The cosigner should understand that they share equal responsibility for repayment if the student falls behind on payments.
Bottom line? Researching financial aid options, applying for scholarships and being a strategic borrower can help your family get on with what matters most: preparing for a bright future.
By: StatePoint
