College is an expense that students and their parents often plan for well in advance of college years. The amount saved doesn’t always cover the cost, however. When parents must decide how to pay for their children’s college education, there are several options. They can rely on funding from past financial planning for college expenses, put the matter into the student’s hands, pay for it themselves through student loans or employ a combination of any or all of these. There are a number of factors that play into the resulting plan, such as the amount of tuition, room and board, what type of education the student wants to pursue and how seriously the student takes the college experience. In some cases, the student may qualify for scholarships, grants and other types of funding which relieve the majority of the college expenses. What is left is often addressed by the parents or the parents and students together.
Parents have several choices in the types of parent-student loans they choose to pursue. One private type requires them to apply for and pay for the loan, while another requires the student to apply for the loan with a parent as cosigner on the account. As the applicant, the parent or guardian can secure a lower interest rate on a private educational loan and pay for the schooling. This money can be supplemented by federal grants, scholarships and other financial awards that may or may not need to be paid back. There is also a federal student loan for parents that ranges 10 to 25 years, requiring the parents to be responsible for the entire balance. This is often at a fixed rate.
For some parents, having their children assist in paying for college may be a tool for teaching kids the values of responsibility, money and education. While this is difficult for some children to learn, it eases the financial burden on the parent or guardian. As a cosigner on a loan, the parent is in a supportive role, giving the child the main portion of the responsibility. After graduating and fulfilling the obligation of making 12 consecutive payments, the child can apply for the cosigner to be released. Many lenders with a parent as cosigner will offer a lower interest rate with a repayment term of five to 15 years. These are often variable rates.
For children on their own to pay for higher learning, a private student loan is a possibility. The lender may approve the application based on the amount requested, the child’s academic background and a number of other factors. The payments may begin during enrollment or after graduation. Some lenders offer plans for borrowers to pay off the interest while they are still in school, while other plans don’t require any payments until graduation or completion of schooling if a degree is not achieved.