Tag Archives: college debt


Your Teen Wants You to Cosign a Loan—Now What?

Let’s paint a quick picture of the college landscape: there is $1.2 trillion in outstanding student loan debt, and, if the current system remains, every graduating class from this point forward will become the most indebted class in history.

That may seem dreary, but it’s important not to paint college affordability with a broad stroke because a picture may still be worth 1,000 words, but a solid financial college plan is worth way more than $1,000.

Part of that plan may include student loans. Before you sign on the dotted line as a cosigner for your teen and send them on their merry way, consider these important facts:

  1. Consider ALL options

Federal loans never need a cosigner and have more favorable terms for students to pay back the money in a fair and timely manner. Look into these types of loans first, along with any and all scholarship or grant opportunities. Only then should you look into private loans, which require a cosigner.

  1. Know the implications of becoming a cosigner

If you’re thinking about making a big purchase like a car or a house, you may want to reconsider your choice to cosign a student loan. Becoming a cosigner makes it more difficult to take out other loans or credit cards. Plus, if you miss any payments, your credit score will suffer. And if you want to get out of the pact, think again. It’s next to impossible to relinquish your responsibility once your teen is 21 years old and your name is still on that paper. In extreme cases, cosigners sometimes remain responsible for payments even if the person who is receiving the loan passes away. That is why many experts recommend a life insurance policy in conjunction with a private student loan.

  1. Be sure your teen is on board with the plan

Every parent will differ in their approach to their teen’s financial contribution. If you expect your teen to contribute, ensure that they can do so responsibly. You can get your teen accustomed to this responsibility by setting up a chores-for-allowance system. A more extreme option is to have your teen sign a document that stipulates they will repay any missed payment and/or fees you cover over the life of the loan. In an ideal world, this will mostly serve as a real-life reminder of the loan and not a first step toward a date in daytime television family court.

  1. Be realistic with the loan

One of five things all students should know about loans is to only take out the amount of money they truly need. The general rule of thumb is to estimate the salary your teen could earn upon graduation and stay below that number. If you learn better through hard figures, The Wall Street Journal reported that between Oct. 1 and Dec. 31, 2015, private debt collection companies hired by the Department of Education garnished more than $176 million in wages from defaulted student loan borrowers in order to pay back their debts. You don’t want that for your teen, do you?

After poring over the reality of the situation, you may find it in the best interest of both you and your teen not to cosign a student loan. You may get a cold shoulder or two because of it, but you will be able to say, “I told you so,” when they graduated debt-free.

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Where To Look For College Scholarships

By Erin Lowry, contributor

College educations come with high price tags. Even many state schools end up being unaffordable, once families calculate living expenses, books and other unexpected fees. While many parents want to be able to financially provide for their teens’ education, some of the burden to fund a degree needs to be placed on the student. But paying for college doesn’t have to correlate to tens of thousands of dollars in student loan debt. Instead, teens should seek out scholarships and grants.

Most people think of scholarships in two ways: athletic or academic. If your teen can’t throw a perfect spiral pass and tends to have more Bs and Cs than As, it doesn’t mean all hope is lost.

Unusual scholarships

Hundreds of obscure and wacky scholarships exist. Some will be available in your area from local church, community or service-minded organizations. Others can be found online. A few examples include:

Find more surprising scholarship options at scholarships.com or collegexpress.com.

Just remember, even something seemingly small, like a $300 scholarship, can help alleviate the cost of books or subsidize paying for a dining hall pass.

Check all options at the college

Many colleges offer a variety of specific scholarships — and sometimes they aren’t available until a student reaches sophomore through senior years. It can take time to unearth these often-overlooked gems, but the hours spent searching could yield hundreds to thousands of dollars.

Students should create a long-term plan for finding and applying for scholarships and grants throughout college, not just as freshmen. Don’t forget to advise them to make an appointment at the financial aid office to discuss available scholarships and grants.

Consider a gap year

A potentially controversial suggestion, the gap year offers young people a year to hone a skill (such as speaking a foreign language) or get real-world experience in the workforce. Notably, it can be a year spent earning money to help pay for college and avoid debt. Many colleges even allow for students to defer acceptance for a year, so a prospective student can be guaranteed a spot and spend a year earning the money to afford his or her education.

Biggest name doesn’t mean best fit

Most important of all, remember that the biggest-name college your teen gets into doesn’t mean it’s the right fit. Graduating with a journalism degree and $50,000 of debt gives far fewer options than graduating with the same degree and no debt.  Truly assess what will be best, instead of being blinded by a name brand. While making the decision, consider using CollegAbacus.org to get an assessment of the real costs of each school.


Erin-Lowry_150hErin Lowry is the founder of BrokeMillennial.com, where she uses sarcasm and humor to explain basic financial concepts to her fellow millennials. Erin lives in New York City and works for MagnifyMoney




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College Prep: Budgeting Before You Get to School

By Jennifer Powell-Lunder, contributor

There are few greater feelings than an acceptance letter to a choice school. The majority of the stress seems to dissipate as soon as the decision is made. The college prep process, however, has many phases and stages. For a majority of students, college offers the first taste of what life is like as an independent individual. Even if parents and/or loans are footing the bills, the need to plan and budget becomes paramount.

So how can a student begin to prepare prior to attending college? What is required to ensure that a student is successful and plans financially for this new venture? Following are some quick tips on how to manage finances before the trunk gets shipped off to school:

Start saving now. It is never too late to put some money away. Students are best served opening a special account where they can sock money away and forget about it until it is needed. Parents and students planning early should look into 529 savings plans.

Learn to live on a budget before going to college. It is easy for a student to believe that once school starts, there will be no problem managing finances. As with most tasks however, practice makes perfect. The sooner a student tries to live within the structure of a budget, the less financial stress is experienced at school later.

Know what expenses to expect. Calculate expected costs in advance. Students and their parents are best served sitting down and going over all the potential costs prior to going to school. This will help to assure an accurate budget is created. Talking to a current student at the college can help to determine what types of things to consider. A quick call to the resident life or the activities office at the school can also help garner this information.

Inquire about employment options in advance. Many students assume that getting a job on or around campus will be easy once they arrive at school. Unfortunately, this is often not the situation. Savvy students inquire early. Although an off-campus job may pay more, enrolling in an on-campus work-study program is often the best option. The hours offered are usually flexible so students can work around their class schedules.

Avoid accumulating debt. Credit and debit cards are very enticing for students. If your teen is planning to get either a credit or debit card for college, it is important that he or she learn how to manage this before going away to school.  Debit cards are usually a wiser choice simply because students can only spend what they have. Debt can quickly accumulate with a credit card.

Heading off to college is an exciting experience. The planning involved can at times seem overwhelming, but students who are already adept at handling finances will find themselves one step ahead in the college prep-for-success game.


Jennifer Powell Lunder_New Headshot_Dec 2014Jennifer Powell-Lunder is a clinical psychologist specializing in work with children, adolescents, young adults and their families. She is co-author of the book Teenage as a Second Language, the creator of www.itsatweenslife.com and co-creator of www.TalkingTeenage.com. Jennifer is widely published and regularly featured in both national and international media as a Parenting Expert. She is an adjunct professor of psychology at Pace University and maintains a private practice in Westchester County, N.Y.