As most students are either beginning the moving process and set to begin the fall college semester in the coming days, there are still those who are soon to be back on campus but have yet to begin the process of moving into their dorm or apartment. However, what both of these students have in common is that most are in a position where they have their semester finances in order, so that they will be able to meet the costs of attending their chosen educational institution for the coming semester, but this is where some parents are often looking at either current financial needs or tuition assistance plans that may be available for the future.
Parents are usually in one of two main positions in terms of helping their student meet college tuition costs and these usually come in the form of either helping students pay for college at the present time or helping students pay off college debts after graduation. Some parents at the present time are looking for a federal or private parent loan opportunities that may be able to help them offer financial assistance to their child, but some parents are positioned where their student has graduated and now faces a great deal of financial debt as a result of having to take out loans during college.
In the first situation, those who may be looking at parent loans need to understand that these particular types of loans may come at a higher interest rate than a student loan, even if a parent uses a federal loan to help meet these college costs. Simply put, many advisers often counsel parents to make sure that they exhaust all avenues of financial aid, and even have their student borrow these loans, as student loans can come with a lower interest rate and more repayment options if a student runs into financial difficulties after graduation. Parent loans often seem like a good idea since these men and women often want to help their children repay any college costs they may have incurred, which is understandable for the most part, but parents will be helping students repay these debts at a much lower rate in most cases if they avoid these parental loans.
However, students may also find that their parents are helping them pay off debts after college, and there have been some concerns as of late by financial advisers who are seeing parents use retirement funds to help meet college costs. Some individuals have taken money out of 401(k)s or IRAs plans and either help the student meet tuition payments while they are in college or pay off college loans after graduation. This is usually a big concern for financial advisers and planners due to the fact that this is a hindrance in the life of a parent in terms of how much they will have for retirement as not only are they taking funds out of their retirement account but many will pay penalties or taxes as a result of doing so.
Obviously, parents may stand a better likelihood of avoiding these problems if they begin saving early through options like a 529 college savings plan, but if a parent is in a position where loans will be necessary for their student, this should not only be a last case scenario but some advisers want students to take on this debt since they can get more affordable rates and help with repayment if financial distress arises. While federal student loans offer forgiveness options, they may also offer reduced payments if the student faces financial hardships after school, and this can be a more affordable situation in which a parent may help their student repay than if they chose a parental loan which could come at a higher rate.
Loans for college are a highly debated issue and since many students are having to turn to this type of financing it has raised questions of whether college is even worth the costs at the present time, but parents will have to make an incredibly personal decision as to whether they use parent loans to help their son or daughter through college, but again, if they are set on helping their students pay costs in a situation where borrowing may be required, a careful review of what parent and student loans may entail will be necessary so that parents will be able to find the best option for themselves and their college student.