What Your Kids Need to Know to Prepare for College Loans

Financial Considerations

college student femaleBefore applying for college loans and other financial aid, it's important to understand exactly how much you will need to borrow. There are tuition calculators available online, and a college or university admissions personnel can also offer expertise to help you ascertain an adequate amount to cover the costs of college tuition.

There will need to be a focus on other financial resources available before applying for a loan. This includes savings accounts for college, scholarships and financial aid. College students should make every effort to find access these types of aid so they can ultimately borrow only the minimum amount necessary.

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Clarify Financial Ramifications

college school of commerceStudents about to enter college should already be receiving basic financial lessons from their parents in preparation for life in the “real world.” Basic education in credit cards, checkbook balancing and proper money management is very important and traditionally not taught in schools or even colleges. Financial education is important in order to build a proper financial foundation that will be important in later life.

Students should learn what happens throughout the process of applying for and receiving college loans and other financial aid that will need to be repaid during or after college. Student loans are often the first foray into financial matters young adults will take. They should learn how these loans work so they will be prepared to deal with them on their own.

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Key Lessons in Loans for Students

college student maleStarting with the loan research process, parents can teach their children the importance of finding the right loan. Concepts to be discussed include interest rates, repayment schedules and the consequences of defaulting on a loan. While students might not have to deal with repayments until several years down the road, it is critical they understand the process and what will be expected of them after graduation.

Students also need to learn how loans will affect their overall financial life. Missing payments or defaulting on an entire loan can set the stage for credit problems for years to come. Because many students struggle to find a good paying job upon graduation, they will need to prepare for making the loan repayments early to ensure they have the cash to take care of their financial obligations.

Other factors concerning loans should also be covered. Many loans and financial aid offer students a break until they can get more financially stable after graduation. Students need to understand what their options are for loan repayments, consolidation and forbearance requests.

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Involvement in the Process

college students lunchThe student loan process might be a bit overwhelming to a young adult, but it can provide important experiences for their future. Parents should involve kids in the search for the right loan and keep them involved in the rest of the process including the loan application and the signing of the loan documents.

Parents who co-sign for the student loan should also outline their expectations for the repayment of the loan. Some parents are willing to repay the entire loan amount, while others are not able to provide the same for their kids. College students should read through the fine print of the loan documents and understand what they are signing.

The repayment of the student loan after graduation is essential to building good credit and students should continue to keep their financial obligations during and after college in focus. Working while in school may be necessary in order to ensure loan obligations are met on time regardless of their employment opportunities after graduation.

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