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Here at Send Your Kids to College we help students and families navigate the financial planning process for college. It isn't easy, and many times we see families who unfortunately wait too long to determine how college will be funded. The typical way has become to just accept the cost going in and bury yourself into a lifetime of student debt, but that isn't the only option! We seek to help the WNY community better understand how to be ready to send your kids to college!
Here are 4 Things You May Not Know About Student Loans
There are 2 Types of Federal Student Loans
When you look at federal student loans, as opposed to private lenders, you look at 2 categories: subsidized and unsubsidized. Unsubsidized federal student loans are available to all students, regardless of financial aid. Subsidized loans are reserved for students that have financial aid, and the federal government pays the interest while you the borrower is in school. In order to be eligible for both options, students and families must submit a FAFSA.
Federal Loans May Not Cover the Bill
Depending on your financial situation, you may or not be approved for enough federal student loans to cover the total cost of attendance. Even if you receive monies from FAFSA, you may need to explore private lenders and review your desired school's preferred lender list. Unfortunately unlike Federal student loans that are a fixed interest rate, these private lenders often have variable interest rates.
Payment, Bankruptcy & Forgiveness
Though you have 6 months after graduation to start paying your loans, reality sets in pretty quick for the post college student. The 6 months is intended to allow the student to "find employment," which is nice, but good luck finding an extra $400/month in addition to your other expenses. Student Loan Forgiveness has been a hot button issue, but looking unrealistic at this time. Some job sectors like government organizations and not-for-profits may have student loan forgiveness options, and some employers will help pay your loans. Unlike most debts, student loans CANNOT be terminated through bankruptcy. If you stop making payments, the government has the right to start garnishing your wages. Yikes!
It's Easy to Borrow More Than You Need (Or Can Handle)
Regardless of your financial situation, the federal government and private student loan lenders are NOT going to tell you to borrow LESS. They won't ever tell you you've borrowed "too much," or that you are stealing from your future self in a sense. One good way to think about how much to plan for coming out of school is to not borrow more than your starting annual salary. Borrowing too much can set your career back, as well as your life plan. Start planning early, and save your future some money!
These are just a few high level points that are commonly misconstrued in the world of student loans. If you have a child, it's never too early to start thinking about their college financial plan. So often we see families scrambling to find the money for that perfect dream school, and the emotional letdown that occurs for the hardworking student when they can't afford it. Stay ready financially, so you don't need to GET ready once it's too late!