Parents are increasingly shouldering unrealistic expectations and financing the cost of their children’s education by sacrificing investments in their own future.
Four disturbing facts should bring home salient truths about education loans:
- Graduates are spending more than 30% of their early income on student loan payments.
- Students are availing loans without a realistic assessment of their future repayment capacity.
- More than two million seniors are still paying education loans.
- Bankruptcies do not waive education loan liabilities.
Assess financial aid awards and compare costs online to make a better decision
Students need to complete and submit the Free Application for Federal Student Aid (FAFSA). The government website studentaid.ed.gov has a free tool the FAFSA4caster that helps students and parents assess how they can deal the costs of education, what aid they are likely to receive, and to what extent they need to commit family resources. Each college posts a net price calculator that details the cost of tuition, college fees, books, lab supplies, room rent and boarding including meals making up the aggregate cost of attendance. From this figure they subtract the grants and scholarship aid that student could be eligible for to arrive at the net cost of education, the funds that parents need to mobilize.
The Consumer Finance Protection Bureau (CFPB) has introduced a Financial Aid Shopping Sheet which helps you compare tuition and college expenses, and awards and scholarships to enable you to identify the course and the college you can afford.
Examining college profiles and deciding which college is financially suitable for your child
Examine each college profile to find out what it takes to figure in the top 25% because only this category will be eligible for merit scholarships. Otherwise, select safety schools and match schools that have lower qualifying scores where your child’s grades places him in the top 25%.
An Ivy League admission does not guarantee future success
If you take a close look at the payscale.com assessment of graduates earnings over a thirty year career span it will become crystal clear that a school’s reputation or prestige does not guarantee million dollar paybacks. A brilliant academic achiever emerging from a regional college has an equal chance of making good in exciting careers. The ideal solution is to opt for colleges that respect your child’ s academic qualifications and offer need based aid that can take care of at least half the expenses. In any case boarding expenses will be excluded from many scholarships and will need your financial inputs.
Federal loans appear harsher than private loans but the reverse is true
- The lower interest rates of private loans are exclusively for the top 20% academic achievers. For others it is a double digit rate.
- The lowest private loan interest rates are usually variable rates which are destined to increase.
- Private loan fixed rates are based on credit standing. You won’t get the best rates unless you touch a score of 725.
- Private loans usually need parents to cosign loans.
- Federal loans have healthier interest rates and protective clauses that give you loan repayment flexibility and debt forgiveness packages if your financial situation worsens.
Plan early bird investments that will cushion college expenses
Your car has hidden equity that can be exploited for constructive purposes. The auto collateral loan is a way of releasing the equity, almost 60% of the commercial value of the car, by placing the car title as collateral for the loan. This car equity loan immediately releases a sizeable amount that can fuel a big ticket investment in your kid’s college education. Give this pawn car title loan amount five to seven years to mature in CDs, money market funds, bonds or value stocks and you will have gained immeasurably in creating a corpus of money for college expenses. The auto equity title loan will charge you interest below 25% SPR with flexible repayments geared to match your present income. Before you know it the loan will be cleared leaving an investment that will solve many problems down the road.