Help Students Manage their College Loans

We thank Herman Davis, Regional Vice President for Liberty Bank, for sharing content from The Liberty Line, a publication of Liberty Bank.

Most college students today are graduating with student loans. According to the Institute for College Access & Success, two-thirds of the undergraduate college class of 2011 had student loan debt. That debt totaled an average of $26,600 per borrower, up from $25,250 in 2010. And, given the increasing cost of college, it’s pretty likely that a college loan is also in your child’s future. It’s important for parents to make their college-aged child well aware of the financial obligations that come with a student loan. A student loan is probably the very first time your kids will be in debt, and they need to know how to be responsible borrowers. So, before your son or daughter takes out a college loan, here are a few things that are important to understand.

Three Steps to Landing a Student Loan

There are a number of things that every prospective or current college student needs to do to get a student loan. But here are three things to remember:

Check the Calendar

Make sure you file the FAFSA by the due date for your college and state to be considered for federal and private loans, as well as federal and private scholarships. Check to see if the college you plan to attend or currently attend also has additional financial aid forms to file, and get those submitted by the college’s deadline.

Some colleges also require a CSS profile to be completed online through the College Board. Make sure you’re well aware of what needs to be filed and by when. It doesn’t pay to wait until the last minute to file any financial aid form. Do it as early as possible, and well before the deadline, if you can. Financial aid money does run out.

Ask Away

The financial aid process can be mysterious. If this is the first time your child is applying, don’t be afraid to ask questions. FAFSA representatives are available online, by phone and e-mail. You can also turn to the financial aid office of your prospective or current school. If the college wants more information about your financial circumstances, provide it as soon as possible.Don’t Wait, Estimate

You might need to fill out the FAFSA before you complete your federal income taxes. But you do need the info from your income tax forms in order to fill in the FAFSA. So, what do you do? Make strong estimates and meet the FAFSA deadline, or your child runs the serious risk of losing out on all types of financial aid. When you file the finalized version of your income taxes, you can update and revise the FAFSA online.

Know Where to Start

Before your children qualify for any kind of aid, they’ll need to fill out the Free Application for Federal Student Aid, commonly known as the FAFSA. The U.S. Department of Education uses the financial information provided in the FAFSA to see if your child qualifies for a federal loan or grant. Most state authorities, along with colleges and universities, will not offer grants and scholarships without completion of the FAFSA. Some private lenders require it, as well.

Even if you or your kids doubt you will qualify for some type of aid, fill the FAFSA out anyway. Given the high cost of college today, it’s very likely that your child will get some type of aid. Complete the FAFSA online here.

Do Some Prep Work

The time to have “The Talk” about student loans is before your student takes out their first one. The US Department of Education offers helpful advice online at Student.govthat can start the conversation. If you’re looking for a simple way to describe interest or how it’s calculated, the FAFSA site can help you do it. Take the time to sit down with your child and look through the various types of loans offered and the terms of each. There’s also a description of federal student loans vs. private student loans. Ask your bank representative for their current terms and rates on their private student loans.

Be Part of the Process

Yes, your new college students may be of legal age. But the world of lending is likely unfamiliar to them. Helping them to understand the ins and outs of the student loan process is a wise idea. Start with the basics. Make sure your child is well aware of the different types of loans out there. Each and every loan comes with set terms, so give your kid the details of current rates on federal loans and private ones. If and when you talk with your bank representative for additional details on private student loans, have your child be a part of the process, if possible.

Do You Qualify?

If you’re looking for financial aid, you’ll need to demonstrate financial need. But don’t let that phrase deter you from filing a FAFSA and looking for aid. With the high cost of college, even middle class people are getting some type of aid. If you’re looking for a federal or private loan, you’ll need to be enrolled in an eligible degree program at the college.

You will need to be a US citizen or an eligible noncitizen. To find out if you are an eligible noncitizen, look online FAFSA.ed.gov. Besides that, you’ll need a Social Security number. Guys between the ages of 18 and 25 have to be registered with the Selective Service. And, obviously, you’ll need to be accepted into a college or university and enroll at least on a part-time basis.

Minimize the Debt

But before your children sign on the dotted line, help them find as many outside scholarships as possible, so that they’ll minimize their debt load. If they are headed to college for the first time, sit down with their high school guidance counselors to seek help in finding private scholarships. Search online to get details too. If your children are already in college, make sure they talk with their school’s financial aid department for information on private scholarships.

The college or university probably has its own list of the available private scholarships out there, so ask for the information. And make sure your kids are well aware of the things they need to do to qualify for private scholarships directly from the college.

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