It’s mid-August and back-to-school shopping is in full swing. Does it seem like the shopping list gets longer and harder as your child grows older? By the time a student hits high school parents have to figure out what a graphing calculator does, find money for the senior prom and senior class trip, and join different booster clubs.
The money train doesn’t come to a stop, as many parents are surprised to see just how much it costs to get a child ready to attend college. Campus visits, application fees, and testing fees all add up quickly. Now that classes are beginning, there is a flurry of activity to buy furnishings for dorm rooms or off-campus apartments, find a reliable computer that will last, purchase textbooks, stock up on snack foods, and get a wardrobe that is stylish for all seasons.
All that money could be gone and out of your pocket before the first tuition bill even arrives. That’s when it hits you that you don’t really have enough money to pay the bill and support your child for the upcoming semester. Now you really have to scramble and shop for student loans, but try not to panic or you could make a costly mistake. Here are a few tips to help you make wise student loan choices:
• Calculate How Much You Need to Borrow: Try not to over-borrow and spend the money haphazardly, as that could have a dire financial impact when your child graduates. Calculate how much money is needed for tuition, room and board, and all expenses. Subtract what is available in scholarships, grants, and federal work-study jobs and any other type of savings or available income. Borrow the remainder and caution your student to stick to the budget that has been set.
• Make Sure You Have Maximized Federal Student Loans: Generally considered to have the lower interest rates and a wider variety of repayment options, federal student loans should always be your first step. Make sure you have reached the limit on these loans before looking into private student loans.
• Compare Private Student Loans Carefully: Private student loans are available from a number of lenders such as banks, credit unions and national companies. Each will have different terms and interest rates, so you will need to compare and contrast available products from at least three student loan lenders.
• Always Think About Repayment: Never put off until tomorrow what you should be thinking about today. Part of the problem in the student loan crisis is that too many students and parents didn’t pay close enough attention to the amount of money they were borrowing, didn’t talk about who would be responsible for repayment, and had no clear idea of whether the student would be able to earn enough money to meet monthly repayment requirements.
Once you have received the loan amount and your checklist is complete, parents can relax…at least until they come home for the holidays!