Category Archives: student loans

college costs, financial aid, student loans

Taking on student loans the smart way

 

Student loansThe May 1st college deadline is quickly approaching and parents and students are making decisions about financial aid packages. Most likely, those packages will include some form of student loans–either Stafford or Perkins. Colleges also provide parents and students with private loan options to supplement the government aid when necessary.

No one wants to graduate from college loaded with debt, yet 60 percent of college students and their families borrow money each year to cover ever-rising tuition and fees, according to American Student Assistance. That’s because the average private college charges close to $40,000 a year for tuition, fees, room and board, while state universities average just over $17,000 a year. Out-of-state students at public four-year schools fall halfway between those costs, averaging just under $30,000 for the 2011-2012 school year, cited US News & World Report.

Financial aid — merit-based and need-based scholarships, grants, work-study programs and loans — has become a reality for the majority of college students.

A New Way of Life

The process of finding aid begins with completing the Free Application for Federal Student Aid (FAFSA) to determine expected family contribution (EFC) based on family income and expenses. There are 63 universities in the U.S. that claim to meet 100 percent of students’ financial need, as determined by the FAFSA. The cold hard truth is that the majority of students don’t attend these colleges and will need some form of financial aid.

Protect Yourself

While working through the process of acquiring funding for college, remain mindful of identity protection. Your soon-to-be college student can be especially vulnerable to identity theft because his or her personal data is easily accessible through grade postings, credit card applications and online transactions, according to the Dept. of Education.

Here are some ways to protect the identity of your student:

  • After completing the FAFSA, log off the page and close your browser.
  • Don’t use paid financial aid services that operate over the Internet or by telephone. The Department of Education offers its services for free and pages containing your private information are password-protected.
  • Do not reveal the FAFSA personal identification number (PIN) to anyone, even if that person is helping you fill out the form. The only time you should use your PIN is on secure websites.
  • Shred receipts and copies of documents with student identity information if they are no longer needed.
  • Review financial aid award documents and keep track of the amount of student aid applied for and awarded.
  • Make sure your student reports all lost or stolen identification (such as your student ID card) immediately.

Forgiveness

When your child graduates, the payoff amount on the loan may seem crushing. But your child has options: student loans, especially those connected to postgraduate professional education, sometimes can be paid off through public service. In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to work full-time in public service jobs. Borrowers who have made at least 120 payments on eligible federal student loans may qualify for forgiveness of the remaining balance while employed full-time by certain public service employers, according to StudentAid.gov.

If public service isn’t an option, loan repayments can be accomplished more easily by paying off private student loans before paying off federal loans.

Be Smart

Only borrow what you can afford to repay. There are numerous sites that provide student loan repayment calculators. Know your options before you borrow and educate yourself on student loan repayment. Research salaries for your career choice and always estimate using entry-level figures.

 

financial aid, parenting, student loans

How co-signing can get your children lower student loan rates

 

co-signingWhen it’s time for your children to start looking at colleges, you may be wondering how you are going to pay for tuition and other expenses. Private student loans for college may have lower interest rates than some federal loans and flexible repayment options which can help your student get the funding needed in a way that’s simpler to manage. However, your child may not have the income or credit score to qualify for student loans or lower student loan rates that are available.

Benefits of co-signing a student loan for college

Co-signing your student’s loan may open up private student loan options that would not have been available to him if he was applying on his own. Since income and credit score are important factors when banks approve private loans, and your student may not have a steady source of income or any credit score to speak of, co-signing may be the only way he can obtain a student loan for college. By co-signing, not only will you help his chances of loan approval, but your credit score could also contribute to lower student loan rates.  Plus, getting your student started with a loan that has his name on it can possibly help improve his credit score for future lending opportunities.

Information to consider before co-signing student loans for college

While lower student loan rates mean lower monthly payments for your student, you should understand the responsibility of co-signing before you make a commitment. Your child will be the primary borrower, but by co-signing you are responsible for loan payments if he defaults. Late payments could also negatively affect your credit score. Be sure your child fully understands the responsibility this puts on you, and the importance of making payments on time before you decide to co-sign. You may also want to draw up an agreement, stating he will eventually reimburse you for any loan payments you need to make on his behalf.

Look for private student loans with a release option

Since there are some cautions surrounding co-signing student loans for college, you may want to look into a private student loan that offers a co-signer release option. This allows you to co-sign, helping your child get approved and obtain lower student loan rates, but it also releases you of payment obligation after the student has made a certain amount of consecutive, timely payments. This shows the bank enough confidence in the borrower that you (as co-signer) no longer need to be included for security purposes. Make sure your child understands that once the co-signer is released from obligation, they will be solely responsible for the loan payments. Speak to a lender at your local bank today to learn more about private student loan options and how co-signing could help your child obtain financing for college.

Sponsored content was created and provided by RBS Citizens Financial Group.