Many people are familiar with students’ loans, educational funding from the government or private institutions that finance students throughout their study on the condition that the student will pay the total amount that was given to him or her, in instalments once the student gets a job.
However, instead of a student applying for a student loan, the parent can apply for a loan on behalf of their ward. The parent will be responsible for the repayment of the loan after the child completes his or her education.
1. BEFORE YOU BORROW
Do not be hasty to apply for a loan. There are other options that you can choose from before finalizing on taking a loan. You can apply for a student’s scholarship. There are different scholarships that you can and your kid can apply for that you should try out, scholarships for parents, fully-funded scholarships, partly funded scholarships, scholarships based on your nationality, scholarships for students pursuing your kid’s desired degree, and so on. Ensure that you exhaust every scholarship on that list.
Next, check for grants. Fill the Free Application for Federal Student Aid (FAFSA) form to qualify for grants. Check for other grants that are not federal grants and apply for them. You can also explore other options of your conception like asking your employer for loans stating the specific purpose of the loan. Be open-minded, be optimistic and think outside the box.
2. HOW TO BORROW
If you have checked all the boxes in the previous heading and you arrived at a dead end every time, you can now give a loan a thought but before taking a loan, you must, first of all, find out all that is involved. Find out about the loan type, the interest amount, flexibility of the loan, etc. Understand what makes you eligible for a loan – when a parent still owes their student loan, it is usually hard for the parent to get a parent loan.
A loan comparison calculator is used to weigh one loan against another and find out which one is more pocket-friendly. A loan calculator on the other hand will give you a breakdown of the monthly payment on a loan and the amount you will pay at the end of the loan. Make use of these two tools when you are analyzing the loans.
Understanding the structure of education loans will help make the loan process easier because you already know what to expect and you know what to do at every point in time. It will also help you make feasible financial plans for the future.
3. WHERE TO BORROW
There are two different educational loans that you can get;
- Federal Loan: This loan is given by the federal government. It has a fixed interest rate and once you qualify to get it, you are given it instantly. There is no need to check your credit score.
- Private Loan: A private loan is issued by private organizations and the interest rate can either be a fixed or variable rate. Loan eligibility is determined by the borrower’s credit score.
Bringing it home, education is one of the best legacies any parent can give to a child, so whatever it takes, get the funds to sponsor your child through school, and later in the future, you will reap the labor of your effort.