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.
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.