Cost and loan are four letter words that draw sharp reactions from college-bound families. The truth is loans are the way most people pay for big ticket items. People take out auto loans and home mortgages routinely. What makes assuming debt for a college education so scary is not properly addressing the issue of affordability.
It’s no surprise that too many lack the essential skill of college financial literacy. Before higher ed commitments, high finance is usually something students watch in movies or T.V. shows but don’t directly experience. Parents getting ready to focus on retirement will find college costs have changed substantially since their own attendance. So has the average length of time taken to graduate.
There are government and private loans for student or parent borrowers. Usually students take federal financial aid loans first before considering other types because of their favorable terms. However, the amount offered may not satisfy the college bill. Parents often opt for the federal PLUS loan to make up the difference rather than mortgage their home and risk losing it. Private loans usually require more in depth credit checks and students may need a co-signor. It is always wise to compare and contrast terms, loan forgiveness features, repayment plans and interest rates.
Families may use the parent-student team to meet the monetary challenges ahead. They can balance two facts-there is no loan for retirement and starting a career is different than being in the middle of it. Read the articles for details but here are four points to get a plan going now:
- Have a college cost talk. The key is for parents and students to get on the same page about the concept of affordability because most teens’ ideas about money are very different from the adults who support them.
- Check out college affordability options. Because of need-based and merit financial aid awards, college sticker price is rarely what the college bill will be. Learn how to estimate your costs and ways to reduce them. (Check out my POCS COA for a more realistic formula of expenses not included by colleges.)
- Borrow only what you need and can afford to repay. No one can predict the future, but students and parents can estimate what monies they will need to maintain a particular lifestyle and if their chosen profession will provide enough income. It’s about being prepared, saving where possible, and making smart choices.
- Never default. When a car loan isn’t paid, the vehicle can be repossessed. When a home mortgage isn’t paid, the home can be foreclosed. No one comes to take away a diploma when there is a default on a college loan. Instead, credit can be ruined, job opportunities lost and dreams smashed.
Read Suzanne’s post: Avoiding Student Loans
Wednesday’s child may be full of woe but Wednesday’s Parent can substitute action for anxiety. Each Wednesday Suzanne Shaffer and I will provide parent tips to get and keep your student on the college track. It’s never too late or too early to start!
The bonus is on the fourth Wednesday of each month when Suzanne and I will host Twitter chat #CampusChat at 9pm ET/6pm PT. We will feature an expert on a topic of interest for parents of the college-bound.
Wednesday’s Parent will give twice the info and double the blog posts on critical parenting issues by clicking on the link at the end of the article from www.pocsmom.com to http://www.parentscountdowntocollegecoach.com/ and vice versa.