Many parents lecture — er, talk to — their teenagers about being responsible. Don’t text and drive. Do try to spend that summer job money wisely. As children approach college, talking about student loans might be a smart idea.
For one, the topic is pretty complicated. And second, even if you plan to help repay any student loans, most qualified education loans are taken out in the student’s name, and there’s usually no escape: Even bankruptcy rarely erases student loan debt.
It can be important for parents to discuss what they’re able to contribute in order to help their young adults wrap their heads around the numbers, too.
Students helping their parents fill it out will get a look at the expected family contribution: the family’s taxed and untaxed income, assets and benefits.
You can explain that all federal student loans borrowed after July 2006 have fixed interest rates, which are set each year, and that private student loan interest rates may be variable or fixed.
Anyone taking out student loans should learn that there are two main types: federal and private. All federal student loans are funded by the federal government. Private student loans are funded by some banks, credit unions and online lenders.
Financial need will determine whether your undergraduate is eligible for federal Direct Subsidized Loans. Your child’s school determines the amount you can borrow, which can’t exceed your need.
It’s important to not overlook the non-loan elements of the financial aid package. They can (hooray) reduce the amount your student needs to borrow.