If you are like most parents, your plans for college could probably be summed up in 2 words, charge it! The statement I hear most while helping families find their best strategy to pay for college is “student loans should cover everything.” While it is true that student loans have been the staple for helping families pay for college for years, there are some large caveats that come with loans, as well as new options to help families use cash instead.

As we have all heard on the news students are leaving college with a lot more debt… and fewer jobs to help payoff that debt. Student loan debt can easily grow to over $100,000.00 and starting out in life with so much debt can be troubling for your children and you. Although Stafford Loans do not require a co-signer most private student loans do; and most of the time that ends up being the parents. Sure co-signing can help your child get lower interest rates on loans, but it can also leave you with a mountain of debt if the loans go into default. Co-signing for a loan puts you in the hot seat if payments aren’t made on time; with retirement approaching for many of you, the possibility of ruining your credit on the last leg probably doesn’t look too appealing. Also since the loans have to be taken out each year, any negative changes to your credit score can adversely affect your student’s interest rate.

I know that none of us plan for our student to end up defaulting on their loans, but it is a reality for many families and there are huge consequences. Student loans are almost never discharged through a bankruptcy, meaning there is no way out of that debt. Even worse the Federal Government can garnish your wages up to 15% for defaulted loans, and private lenders can garnish up to 25%!

By now you might be asking yourself why you have spent your time reading this blog, I didn’t want it to be all depressing so we will try and lighten it up some from here on out. While some smaller student loans can be good try not to let the whole ball of wax rest on what you can borrow. Colleges today are making efforts to help students and parents leave school with much less debt. Many Ivy League schools now have grant programs for students who can’t afford tuition. These programs cover the loan amounts a student would need, with no requirement to pay that money back. Programs like these are popular in many top-tier schools and allow students to pursue career paths such as teaching or social work without having to worry about huge debt. Another newer trend in paying for college tuition is “tuition installment plans”. Tuition installment plans allow students to pay month to month for tuition, often time for a small upfront fee. Before you get too excited, realize that monthly tuition payments could easily be $700.00 or more. Paying an extra $700.00 might seem impossible to some families which is why it is important to have a College Financial Plan setup by someone like your friends here at Indy College Funding.

Ultimately a mix of loans and cash payments often works best for many families. If you want to find out what would work best for you family give us a call and we can setup an appointment for you to find out your Best Strategy to Pay for College.

Kurt