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A college degree today is equivalent to a high school diploma 50 years ago. That is to say it’s an expected, if not necessary, level of education needed in order to secure a job in a number of professional fields.
The one major difference between high school and college is, of course, price. But given the importance placed on higher education, many families will do whatever it takes financially to ensure their child can earn that degree.
For most, that means taking out student loans. Before you and your teen go down that road, you should both be aware of the implications going forward.
These are four things you and your teens absolutely must know before taking out a student loan:
As a parent, you might think loans aren’t necessary since they weren’t when you were looking into college. According to a 2015 Wall Street Journal article, your memory doesn’t deceive you — less than half of students graduated with student loans two decades ago and about 64 percent did 10 years ago. These days, however, roughly 3 out of 4 students will need to borrow money to graduate.
If your teen is one of those three students who will take out a loan, they can expect to be saddled with $35,000 upon graduating. That amount is more than double what borrowers had to pay back two decades ago, even after adjusting for inflation. So not only are more students taking out loans, they’re also paying more in loans.
It’s generally thought the biggest loan you can get is the best. This is not true. A loan should strictly serve to cover the cost of college — this includes spending costs in addition to the basic costs of education, room and board. When taking out a loan, look at what the averages are and then apply yourself and your situation against those. This is one of several tips you should consider during the process.
When applying for financial aid, loans are normally included in the school’s offer. Some student loans are made through the federal government, while others come from private sources like banks for financial institutions. Generally speaking, federal loans offer borrowers more ways to pay the money back along with a lower interest rate.
Make sure your teen has a basic idea of what they’d like to study and what they hope to achieve while in college. They can figure it out while already there, but that’s a costly deliberation period. Getting some real world experience first either through a job, volunteering, or even traveling can help hone their interests and formulate a plan for a worthwhile college experience.
Remember to remind your teen to speak to someone in his or her desired college’s financial aid office. They’re there as resources to help you!