10 Ways Parents Can Borrow for College More Wisely
College Debt Colleges and institutions have a lot of debt.
Parents, who have substantially increased borrowing in recent years to offset high tuition expenses, received about a quarter of all the money given by the federal government to assist families pay for college last year.
According to the College Board, parent borrowing under the federal PLUS loan program climbed 16 percent over the last decade, even while loans to students decreased. According to the Department of Education, this has boosted parents’ total PLUS-loan debt to over $103 billion, or an average of $28,700 per borrower, with billions more outstanding on private college loans held solely in the parent’s name or co-signed with children.
While borrowing for college might be a lifeline for helping your child get a degree, it can also come with exorbitant monthly payments that put a strain on your budget and jeopardize your retirement financial stability.
A brand-new This online analysis of federal government parent-loan data demonstrates how rapidly many families run into major problems: about one in ten parents fail or fall behind on payments within two years of their child graduating from college. Parent default and delinquency rates reached 20% or more at more than 150 of the database’s approximately 1,000 colleges and universities.
So, before you take out a loan to help pay for your child’s school, here’s what you need to know about how to handle your student loans properly and avoid a personal student debt crisis.
Before You Submit Your Application
You should be aware of your true cost. Some schools include Parent PLUS loans in the financial aid package given to accepted students, leading to misunderstanding about the true cost of attendance. Because of how it appears on the aid letter, many families, particularly those whose children are first-generation college students in the United States, are unaware that this is a loan, according to Betsy Mayotte, president of The Institute of Student Loan Advisors. If you’re having trouble understanding your aid package, contact the financial aid office for assistance for a breakdown without the PLUS loan.
First, pay off your student loans. Undergraduate federal student loans have a 3.73 percent interest rate. This is a condensed version of the information.