As college tuition and fees continue to rise each year, it's becoming harder to find an affordable school. Increasingly, students and parents lean on taking out student loans to pay for college.
Financial aid often does not meet the gap, which pushes students to rely on both federal and private student loans. The total amount of outstanding student loan debt in the U.S. rose to $1.51 trillion in the fourth quarter of 2019, according to the Federal Reserve Bank of New York. The rise in debt levels over the past decade has impacted the ability of graduates to buy their first homes and save for retirement.
The financial impact of a high amount of student loans can impact families for many years if they are only able to make the minimum required monthly payments. The cost of tuition and room and board for four years at an in-state public college rose to an average of $21,950 while four years at a private college averaged $49,870 for the 2019-2020 school year, according to data from the College Board.
How do parents pay for college?
Shouldering the cost of college while maintaining one's personal finances is possible. Here are some tips that parents can follow to help pay for their children’s college education without going into massive debt.
Research private student loans
Private student loans can help a parent pay for their children’s college education. Parents can take out a Parent PLUS loan when their kids have reached the maximum amount allotted for direct subsidized and subsidized loans. These federal student loans are provided by the Department of Education, but borrowers must have an adequate credit score.
Credible makes it easy to add a cosigner to your loan application and compare multiple lenders to see which one gets you the best loan terms and a lower interest rate.
Many parents consider co-signing a student loan — in fact, almost 94 percent of private undergraduate student loans are approved because of a cosigner. A parent who co-signs a loan will greatly increase the chances of the loan being approved. Use Credible's student loan calculator to determine how much your monthly payments will cost or plug in your information below to see what kind of loans you qualify for.
Create a college budget
Parents and their children can work together to contribute to a college savings account and agree on a budget that's realistic for the family. One consideration is to factor in private student loans and determine ahead of time how much money the student should borrow — which factors into your college savings plans — and if the parents should take out a student loan or co-sign a loan.
Credible’s online tool can help parents shop around and compare loans to get the best interest rates and terms.
Invest in education early
Parents should invest in education early. Speak with high school counselors to learn how you can improve your child's education, like students taking AP exams to earn college credits. The extra credits can translate to college hours or skipping certain course requirements. This could mean a student could graduate even sooner and save money on college tuition and fees.
Apply for financial aid
Seek federal financial aid via the Free Application for Federal Student Aid (FAFSA). Parents can be more involved in the college admissions process and have a better understanding of each school’s financial aid offer. Research what each university offers for scholarships, work-study programs and the costs of the housing requirements ahead of time. If eligible, submit the FAFSA to see if you qualify.
Seek out scholarships and grants
Parents can find scholarships and grants that their children can apply for online. There are many scholarships that are either based on financial need or merits such as academic achievement. The financial aid office of a college or university has information on how to apply for a scholarship or grant. Make sure you connect with a financial advisor if you have any more questions.
The U.S. Department of Labor’s free scholarship search tool, federal agencies, state grant agencies, religious or ethnic organizations, foundations, local businesses or civic or community groups are also good resources. Many employers also provide scholarships to the children of their employees.