Allowing Your Child to Take Out Student Loans
Allowing your child to take out student loans is one way that helps them get the schooling they need without having to come up with the cash all at once. Depending on which college or university they want to attend, it can end up being very expensive and you or they may not have these funds immediately available. Rather than pull out a second mortgage on your home to pay for these tuition costs up front, it might be more feasible to help them understand their options when it comes to student loans. Of course, because there are so many programs set up for this kind of help, it can be hard to remember that it's actual cash you need to pay back later.
Learn How to Read Statements
For this reason, you should help them review their statements or learn how to keep a close eye on how much they are receiving each semester. In the case of some programs, this is a check that will automatically be sent to their school of choice. This makes it even easier to sort of forget how much cash you have just received, especially when it doesn't actually pass through your hands. Sometimes when things happen automatically, it really doesn't sink in how much the amount is or how difficult it might be to pay back later.
The other important factor is to make sure you have a plan in place to start paying them back as soon as possible. If for some reason you're not able to obtain employment right away, there are ways to defer these payments for a period of time. In order to quality for these deferments, you need to meet certain criteria. Have your child talk to their student loan representative about what is required in terms of documentation and paperwork submissions in order to receive one of these deferred forgiveness programs.
Effects on Credit Scores
These payments will affect their credit rating and payments so it's extremely important that they don't get forgotten or left behind in order to pay other bills. When your credit score is lower, you qualify for less of everything else including housing, credit card limits and even employment. Having this discussion with your child, and potentially sharing your personal experience, will give them some information to use as they start looking at various options to attend school.
There are also a lot of educational tools that are available so both parent and child can understand their obligations when it comes to student loans. It's a good time to sit down and learn about what is required not just in the long-term but also in the short-term. This is something that can end up being a financial bill they have to pay on for years, depending on how much and how often they borrow. Without some solid advice, you may find that they have difficulty getting through the basic life decisions that involve finances and this will just one more burden on their shoulders.
Allowing your child to take out student loans can be a real blessing in terms of giving them the ability to attend the college they want in order to have the career they desire. It's just important that everyone approaches this with the thought that real money is being given to them, and real money must be paid back. It's not free and you might want to shop around between a few student loan providers to see who can offer them the best interest rate.
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