With the rising costs of college, difficulty in managing living costs, and the many financial hurdles to attending college, it comes as no surprise that millions of Americans take on different forms of student debt and parent loans to finance their education.
From federal loans to private loans such as those offered by universities, private lenders, banks, and other organizations, there are several options available to students and their parents. With the lack of credit history and scores, young age, and other factors, it can be difficult for students to find adequate funding.
Parents can continue to financially support their kids through college through parent loans and by becoming co-signers for them. But before you commit to a private parent loan for your kid’s education, there are some important dos and don’ts you should be aware of:
Don’t borrow without researching
Look into programs that are cheaper, offer scholarships, and can help cut down on as many costs as possible. From living expenses to out-of-state tuition, you should look into multiple options that are available and applicable to help make the process of borrowing easier. Leave no stone unturned.
Don’t over-borrow the amount
We know you want to do the best for your kid and want them to have a good life, educational experience, and make the best choices. However, it’s imperative that you stay realistic about what you borrow too. Parent loans tend to be offered at a relatively higher interest rate, and can thus multiply significantly by the time you start repaying them. You don’t need to borrow up till the upper limit; take as much as you need, but not excessive amounts. Remember, you will have to repay this eventually—with interest.
Don’t borrow if you’re about to retire
Unless you’re willing and able to hold off on retirement for a few years, don’t jump onto the loan wagon yet. Parent loans can take several years to pay off, even with reliable lenders like Education Loan Finance (ELFI), who offer flexible repayment periods for 5, 7, and 10 years. If you do plan to retire within 5 years, or at some point during your repayment period, be sure to have sufficient savings, bonuses, and backups because this loan can throw your retirement plans into disarray.
Unfortunately, it can be very tough, if not impossible, to make significant monthly payments without having a steady income stream. Without it, you’ll be dipping into your retirement savings and costs, which can disrupt your quality of life significantly.
Don’t hold this against your kids.
It’s difficult to come to terms with this, but you need to acknowledge that you are committing to this decision on your own terms. There is a culture of silence and stigma associated with helping your kids through their lives and decisions through adulthood, but there shouldn’t be. A loan is a big responsibility and one that you need to have an open and honest conversation about. Don’t hold this over your kid’s head for years to come, and if you’re unable to afford it, you can help out in other ways, such as by cosigning their private education loans.
Do work with a reliable lender
You should only work with a reliable lender such as ELFI because parent loans can put quite a financial strain on you. ELFI guarantees some of the most competitive rates and enticing terms, including no prepayment penalties, application and origination fees, repayment schedules that are suited to your needs. You can learn more about their flexible parent loans for college here.
You will also have a financial consultant available through ELFI to help you through every step of the way, focusing on your needs, financial restraints, concerns, and to find the best loan terms and rates that work for you. The terms of your contract will be customized to your requirements, which is what makes them such a great choice to work with. Find your rate by registering here.
Do get your paperwork in order
From credit history and scores to bank statements, a co-signer, proof of identity, and other documents, you should work with your consultant to put together everything you need for the application. Give yourself enough time to sort everything out, working ahead of deadlines instead of close to them. You might want to take time reviewing the terms of your loan, seeking advice, and consulting with your co-singer, kid, and partner too. Make sure your paperwork and documentation is complete, and speak to your lender about any concerns, queries, and worries you might have.
Do stick to your repayment schedule
This is the advice given to college students too: don’t delay payments without good reason. Don’t just skip a month or two because you want to, or because you wanted to buy a new golf club, or take a mini-vacation. The more regular you are with your repayment schedule, the better it will be for your financial health. Keep track of your balance, your dates, your interest, and everything about your payments to stay on track.
If you feel like you can’t come through on a payment, speak to your lender and inform them about the reason so as to avoid problems. You don’t want this affecting your credit score.
Do plan major life changes around this
Unfortunately, this loan will play a major role in your life choices and changes. If you plan to move, quit your job, start a business, grow your family, sell your home, buy new assets, or any major decision with financial implications, you need to think about them in terms of this loan too. You would consider your car’s installments, and your mortgage, too, right? This is like any other liability.
It’s incredible to help your child out in a culture that discourages it. More power to you for being supportive parents—but you still need to watch out for yourselves too!