Worried about taking out student loans? here are a few tips

A recent poll of The Princeton Review found that the top concern of high school students applying to college is student debt – a marked change from 2006, when that same poll found that the top concern of high school students was getting into their school of choice.

This month and next, as college acceptance and financial aid letters begin to arrive, families with high school students face some important decisions: what is the best school for your child and the smartest way to pay it?

Here are some timely tips.

Compare financial aid award letters carefully

Dissecting college offerings can be confusing as there is no mandatory and standardized way for colleges to submit financial aid letters.

Fortunately, many schools follow the guidelines of the Ministry of Education College Funding Plan Form, which includes the estimated cost of participation, total grants and scholarships offered, and loan options. The standardized format makes comparisons across schools somewhat easier, but regardless of the format of your letter, you can enter the numbers into the Consumer Financial Protection Bureau file. financial aid comparison tool to help you make better comparisons.

Decide what is the best deal to borrow

There are so many different types of loans that it can be difficult to decipher which one to choose. It’s also scary to think that your kids are going into debt on their own, but a federal direct loan, which is almost always available in financial aid programs, is usually the best option. These loans are taken out on behalf of the student but tend to have the lowest cost in the long run. They have flexible repayment options when your child graduates, and they don’t require repayment until six months after graduation.

Focus on whether your child received a subsidized or unsubsidized student loan

Your child will likely be offered a set amount of subsidized and unsubsidized loans depending on their financial situation and the school they wish to attend. The government pays the interest on the subsidized loans while your child is in school; your child will have to pay the interest that accumulates during college on unsubsidized loans. If you are offered both, maximize the soft loans before taking the non-subsidized loans.

Either way, these federal loans tend to have lower rates than the private loans you can get from banks. For example, Federal Student Loans issued in the 2018-2019 academic year charge a fixed interest rate of 5.05%. Private lenders sometimes charge up to three times as much, which is why private loans should only be used as a last resort.

Mark Kantrowitz from savingsforcollege.com says your child’s debt upon graduation should not exceed their starting salary upon graduation. And while the current average starting salary for college graduates is around $ 50,000, that number varies by major. To get an idea of ​​what your child can expect to earn, check out The Glassdoor List of the 50 best-paid majors for recent university graduates.

Calculate your true direct cost

For each school, you will need to add up tuition, room and board, fees, books, supplies and a realistic estimate of transportation costs and all other living expenses (food and other household items, if you live off campus). Then subtract any grants or scholarships – the money you don’t have to repay. The result is known as your net price.

Please note: if your child has received scholarships from outside, for example from organizations or civic groups, sometimes schools can use this money to replace part of the scholarship money in their own offering.

Remember to contact the financial aid office

If the net price of a school is more than what your family can afford (even after adding federal student loans and any other loans you decide to take), you can try talking to a financial aid officer. from school. Approaching them nicely is important; this is your chance to put a human face on the numbers.

If you’ve recently had a setback at work, expensive medical expenses, or any other financial upheaval in your life, be honest and politely explain your situation, while stressing that your child is extremely excited about school and that you’re trying to make it work. .

Be sure to weigh all the factors again

After you’ve spent some time analyzing your child’s choices and what they cost, it’s often a good idea to go back and talk about some very human factors: Is your child really ready to be eight o’clock? road home? While a school may have a great engineering program, is that the only factor that matters?

Keep in mind that almost a third of undergraduates change major at least once. Overall, stress that there is no one “right” decision.

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About Gloria Turner

Gloria Turner

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