Student loan debt is at an all-time high and only continues to grow. It’s a sobering fact, especially considering that most students need some kind of financial assistance. The good news is you decrease your chance of taking on crippling debt or defaulting when you keep yourself informed about the ins and outs of student loans.
Due to the high cost of college tuition, many families are unable to pay for college with savings alone. Traditionally, student loans have provided an important avenue in allowing students to attend college. Even though paying for school may seem like a daunting task, there are several steps you can take to find financing:
- Talk to your school’s financial aid office. Employees at financial aid offices are trained to help people find financing for school and have dealt with many others in the same situation. Ask about options for your financial circumstances.
- Look for scholarships and grants. It is a good idea to look for scholarships and grants regardless of how easy it is for you to find student loans. Why borrow when you do not need to? College financial aid offices usually have information on available scholarships and grants but take a look at finaid.org for more info.
- Consider a home equity line of credit or loan. For parents with a significant amount of equity in their homes, this may be a good way to help finance college. Interest rates are usually low, and the interest is tax deductible. However, it is important for those considering this option to remember that home equity lines and loans are secured debt. You could lose your home if you do not make payments.
- Stay informed. It seems the laws surrounding student loans change every few years. Watching or reading relevant stories in the media will help you to be better aware of what your options are and any new opportunities.
Preparing for the future
For parents, the current student loan crunch demonstrates why it is a good idea to save for college. Even if student loans are readily available, saving allows less reliance on loans, which will need to be paid back after graduation. It’s never too late to save for college, even once you’ve been accepted and are attending classes. Take advantage of available tax-saving vehicles or other investments to help you save and make those loans a little less daunting when it comes time to start paying them back.
For example, 529 Plans, Coverdell Educational Savings Accounts and Series EE Savings Bonds (issued by the Department of the Treasury) allow you to invest savings for college and not pay taxes on earnings, as long as the funds are used for qualified education expenses.
College tuition is high, and paying for college is not an easy task. However, there are several options for funding available, and staying informed can help you prepare for and manage this cost.