Parental Role And Student Loan

Parents play a very important role in every stage of their child’s academic life from childhood to adulthood. Research shows that parents who are involved in their child’s education tend to have a well adjusted child who does better academically. One of the primary ways that parents can help support their college age child is to support their college journey financially.

Here are a few things parents need to know about student loans to help their child pay for college.

Different Types of Student Loans

There are two main types of student loans for undergraduate students that parents should know about; they are:

1. Federal Student Loans – Federal loans are either federally funded or federally insured student loans.
2. Private Student Loans – Private loans are borrowed through private entities, banks, credit unions or other private lending companies and organizations.

Federal Perkins Loans: Federal Perkins Loans are loans with a low interest of 5% for undergraduate and graduate students with financial need.

Federal Perkins Loan requirements:

• Selective Service requirements fulfilled
• Must submit a FAFSA.
• Enrolled in a degree program at least half-time.
• U.S. citizen or permanent residence or eligible non-citizen.
• No overpayments owed or unresolved defaults on Title IV education loans and grants.

Federal Stafford Loans: Federal Stafford loans are low interest loans that are available to students attending schools participating in the federal financial aid system at least half time. Stafford loans are fixed- rate loans and are the most common source of college loan funds.

Federal Stafford Loan requirements:

• Student must submit a FAFSA to be eligible.
• Student must have a financial need.
• U.S citizen, permanent residence or eligible non-citizen.
• Student must enroll half-time.
• Student must attend a school that participates in the Federal Family Education Loan Program.
• No unresolved defaults on any federal education loan or owe a refund on an education grant.

Private Loans: Private student loans are also an alternative source to help pay for college. Private loans also known as alternative student loans or personal student loans are borrowed through private entities, banks, credit unions or other private lending companies or organizations. However, you should only take out private student loans after all other sources of financial aid such as; scholarships, work study federal student loans and grants have been exhausted; and remember to only borrow exactly what is needed.

Risks of Co-Signing a Student Loan

If your child has poor credit or have not established a credit history he or she will need to have a co-signer who has good credit. If you decide to co-sign on your child’s student loan, you are responsible for paying back the loan if your child defaults on the loan. This could hurt your credit score and your good credit history.

Alternatives to co-signing a loan is to have your child try to get the loan by himself or herself or your child can choose to attend a less expensive school, live at home and work part-time to help pay for school expenses. Students who contribute to their own college expenses tend to work much harder in school and graduate in regulation time. So having your child contribute financially to their education may end up being a good thing after all.