Graduation season is fast approaching, and most likely, graduating students are now contemplating on whether they will pursue college or not. Not all students are lucky enough to smoothly enter college without worrying the school expenses. Some families stressed over on the tuition fees they have to raise.
There’s still time to complete the FAFSA
What is FAFSA - Free Application for Federal Student Aid is a government financial aid for students in form of grants, loans, or scholarships. This can be obtained every year by a qualified student.
Online FAFSA application can be filled-up within 30 minutes or less. Be mindful on the deadline of submission of application as some universities require earlier due dates. This is because they usually have little funds to offer.
Take advantage of federal loans first
Once the FAFSA application form is duly filled-up, your child will immediately know the types of federal aid he’s qualified to take. If your child is indeed eligible, avail of the federal student loan instead of private financing institutions.
What are the advantages of federal loans? Generally, they carry lower interest rates and affordable repayment schemes. They don’t require a co-maker or co-signer, and they are flexible in arranging terms in case a student encountered difficulty in making payments.
These advantages are much comparable to private student loans where interest rates are normally higher and a co-maker is required. Repayment terms are much stricter which tends to become difficult to the students. Private loans, however, can be a substitute if granted student aid cannot fully cover the educational expenses.
Learn how Parent PLUS Loans work
Another federal loan that is tailored fit to help the parents in sending their child to college is a Parent PLUS Loan.
Loan eligibility requires that you should be either the biological or adoptive parent of the student and your child must be at least a semester enrolled at a qualified school. US citizenship is a must, though there are cases that non-citizens are also eligible. To differentiate this from other federal loans, this type of aid requires a credit check.
Duly accomplished FAFSA application form should be accomplished by your child. There is a PLUS Loan master promissory note portion where you are required to sign. The total amount you can apply could be the total educational expenses of your child, less other financial assistance received. Interest rates for this loan are at 6.31%.
Think twice before co-signing
In case a private loan will be applied by your child for the college expenses, the financing company will most likely require a co-maker on the loan. Before entering into this agreement, study carefully the loan terms and conditions.
If you’re assigned as a co-maker, you guarantee to pay the loan should your child fail to pay the monthly amortization. If your child failed to comply with the loan conditions without your knowledge, your credit score will be affected due to unpaid loans linked to your credit standing. All of your future loan application will also suffer due to this bad credit record.
Agreeing to co-make the loan makes you responsible for monitoring that your child diligently pays the loan on time. You should be ready to have a steady source of repayment should your child missed a payment.
Know the discharge rules
Of course, no parent wants to think of their child getting a deathful accident or terminal sickness. Though it isn’t a common thing to overthink, it's still important to understand every loan’s policies on this kind of events before availing a student aid or loan.
Usually, if your child died in the midst of paying or getting federal loans, the government automatically discharges your child from indebtedness. The same case applies for parent PLUS Loan, that if either you or your child died, loans are also lifted up. If permanent disability through accident or sickness occurs prohibiting a child from getting a job, the loans can be eliminated by applying for a Total and Permanent Disability Discharge.
Note that this isn’t the same case for private loans. Some may include loan discharge to death or disability of a borrower in their loan agreement, but not all the financing companies offer this. Yes, there are instances where parents who despite losing their child are still liable to pay for the student loans their child left behind. Ensure that you fully understand the discharge rules before signing a private loan.
Being a parent to a child who pursues on getting a college education makes you want to do your best to help them attain it. But in the process, do not forget your own financial obligations. Before looking to a financing company who can grant you a loan, take chances first on grants and government aids to help you in the costs of getting a child to college.
There’s plenty of options for your child to get a more flexible aid to pay for tuition fees such as scholarships, working part-time in the school, or grants. Several programs and schemes are also available in case of difficulty in paying federal student loans.
As mentioned earlier, always remember that the case is not the same for private loans.
Naturally, parents search for a lot of answers to many questions on student loans since it plays a vital role in reaching their child’s dream of getting into college especially when they aren’t wealthy enough to pay for education. With some tips and knowledge, it is easier to understand how every available financing aid works best for you and your child.