Although pursuing higher education may result in more rewarding and lucrative career options to your kid, the cost isn’t to be ignored. As per the College Board, the average debt load of students in 2017 for those who graduated with an undergraduate degrees was around $29,000.
This is quite a steep price, particularly for a child who is still trying to find their way within the big world. And , depending on the career path of your child it is possible that they will be in debt for a long time.
Are you looking to are in control of the cost of your child’s college education? If your child is headed to college there are some mistakes that parents and their children should avoid, and what you can do in the event of a mistake:
Doing not think about the Return on Investment
The first thing parents and students need to consider is the ROI of going to college, says Robert Farrington, founder of The College Investor. “Sure that it’s challenging because it’s not only concerning money. It’s also rather your child’s hopes, dreams and aspirations,” says Farrington. “However spending too much and taking out too much money for college could cause the possibility of a lifetime of financial burden.”
A best general rule to follow? Don’t ever borrow more than what the student is expected to earn during the first year following graduation, advises Farrington. “For instance should your child want to be a school teacher you should not borrow more than $35,000 to cover the cost of the school. If they’d like to be an engineer, they have an opportunity to invest up to $60,000.”
If the total amount of your loan exceeds the amount your child will earn during the first year of college, it may limit the locations they’ll attend schools. However, by being aware of expenditures for education, you can avoid financial burden and overspending. In the event that your kid isn’t certain what they’d like to major on — or want to cut down on the total cost of college Consider enrolling in a community college first before transferring, according to Farrington. You can also enroll in schools that are less expensive which are located in state and living at the home of your child.
Do not take financial fit into consideration when selecting a college
Apart from being an excellent choice socially, academically, and environmentally as well, the child and you need to evaluate their resources in totality as explained by David Levy, interim director of financial aid, scholarships as well as veterans’ services at Rio Hondo College as well as the coauthor on Filing the FAFSA. Also, consider the college savings you can make, as well as the contributions of income and grants, scholarships and assuming the appropriate amount of debt versus the entire cost of the school.
“If your total assets equal or greater than the net four-year cost, the school is reasonable,” says Levy. “But If the all resources aren’t enough the child and you might have to borrow a lot to pay for college. This could cause the student to withdraw from school or change to a lower-cost school once the financial realities begin to set in.”
The bottom line is that in addition to determining whether the college is the right fit for the student’s academic , professional goals and social needs Also, look at whether the college is within the budget of the student.
To Much Borrowing
Beware of borrowing too much, advises Levy. “If the total student loan amount at the time of graduation is less than the annual salary the student is able to pay off the loan within 10-years or less” Levy says. Levy.
Let’s suppose that the total amount owed is greater than their annual earnings. In that scenario the student is likely to be unable to pay the payment on the loan. To meet the monthly payment requirements, your child may need to think about an alternative student debt repayment program. For instance, an income-driven repayment program, in which the payments are determined by your child’s earnings after graduation, and an expanded repayment strategy. Both repayment plans cut down on the monthly payments by extending the duration for the loan.
“This implies it means that the child will be in debt for a longer period and will be unable to complete certain life events, possibly until their children enter college. They will also pay more interest over the duration of their loan.” Therefore, you’ll need to take a close look at your child’s financial situation before they start college and every subsequent year they’re in college.
Cosigning a student loan
If you’re looking to ease the burden of debt for your child and make it easier for the family, it’s important to establish limits and know the ways co-signing for a student loan can impact your financial health. Parents should be aware that a cosigner is in essence an individual who is a co-borrower, says Levy. Then, they’re responsible for the repayment of the loan. “The cosigned loan could impact the credit score of the parent as well,” he says.
So if your child falls tardy with a due date or has a default this will affect not only your child’s credit rating, but also yours too. “Even even if the student handles the loan in a responsible manner by making each payment punctually the loan could hinder the parent’s ability take out loans,” says Levy. “For instance, if the parent is looking to obtain an extension or refinance on a mortgage the cosigned loan would be considered within their debt which could affect their the mortgage’s approval, or the rate at which they pay.”
Don’t apply to scholarships before the deadline.
You’re probably aware that scholarships are among the least utilized tools for the majority of students. There are many reasons for this as pointed out by Farrington. It can be difficult to come by, they require a long time to apply for and the odds of being awarded a scholarship are slim.
However, the great thing about scholarship is the fact that they’re a type that’s “gift aid”–and the funds are abundant if students make the effort to apply for all of them. Make sure you comply with the directions and supply all the necessary documents and details. You’ll be amazed by the number of people who overlook the final step. “Following the directions will give you a huge advantage over the competition,” says Farrington.
Similar to the previous point Some students do not apply for enough scholarships. Although there’s no absolute quantity, Farrington suggests applying to at least 40-50 scholarships If you can. Certain scholarships require fees for application Do your research before you apply and set up an “scholarship fund” should you be able to. “The chances are favorable to pay for a significant portion of your education when you follow this method,” says Farrington.
Do not plan to work during school
One of the most valuable activities college students could do, not just to help their financial goals but also to prepare for their careers in the future working during their school hours according to Farrington. “Beyond the money savings it gives students real-world skills, specifically business communication and problem-solving abilities. They aren’t taught in the classroom. If you work during your schooling, you will be able to develop these abilities, and increase your job prospects after graduation.”
There are plenty of opportunities to earn money while attending college. Work-study schemes, pay-for-internships or jobs on campus. Look through the career listings at colleges’ career centers, or attend a job fair. There is also the option of avoiding traditional jobs that are on-site and search for freelance opportunities through boards like the Upwork and Fiverr. While initially you might not be earning a significant amount of money, freelance work will give you a broad variety of experiences. It can eventually become more lucrative than doing a job on campus.
Incompletely filing the FAFSA
It is the FAFSA (or the Free Application for Federal Student Aid) is your crucial step to not just qualifying for federal work-study, federal grants and scholarships, but it is also the access to the federal loans for students, says Farrington.
“You should be planning to fill out the FAFSA each year, starting as early as you can,” says Farrington. “The reason? A lot of awards for schools are restricted and only given to those who file earlier and meet the requirements. Even if you are eligible but you do not start filing early enough to qualify, you’ll never receive any award.”
You’ll need to complete the FAFSA in the earliest time possible according to Levy. It is possible to file by the 1st of October and the FAFSA has an 18-month timeframe. Also, you should check for deadlines specific to the state and school. So that you don’t not miss the deadline.
In addition, if you require student loans Federal loans are the best. However, not having to fill out the FAFSA will not get you any federal student loans.
When you’re trying to figure out the best strategy to pay for the student loans of your child or figuring out an repayment strategy to repay the student loan, Money Management International (MMI) is there to help. Our certified financial counselors will analyze your situation and provide you with guidance, advice tools and tools.
