5 Ways to Help Your Child Navigate the Student Loan Process

Applying for student loans can be a stressful and confusing process, especially for kids coming right out of high school with no experience managing their own finances. As a parent, you can help your kids in more ways than just whipping out your checkbook. Hereï ¿ ½s how to help them get started. 1. Sit down and talk about it. Parents and kids alike need to know all that is involved in the student loan process and what is expected of you both during repayment. A lot of students donï ¿ ½t necessarily understand what they are getting into and end up taking out more than they need for the cost of school. Itï ¿ ½s easier than you think for anyone over the age of 18 to take out a multi-thousand-dollar loan, so be sure that your child knows all of the implications of borrowing. 2. Explore different loan options. Itï ¿ ½s important to understand the difference between federally subsidized and unsubsidized loans as well as private loans. Subsidized loans are available only to undergraduate students, and the loanï ¿ ½s interest is paid by the U.S. Department of Education while your child is in school at least half-time, for six months after they graduate, and sometimes during deferment Unsubsidized loans are offered to undergraduate and graduate students alike, and your child will be responsible for all interest during the lifetime of the loan. Interest can add up quickly. Private student loans typically have a higher interest rate and can create more financial stress than federal loans. For example, income-based repayment programs and deferment offered by federal loans might not be offered by private institutions. Also, loan forgiveness might not be applicable to private loans, which can be a big deterrent, especially for those who plan to work in the public service industry. RELATED: 7 things you may not know about student loan repayment 3. Be cautious about cosigning. Know whatï ¿ ½s involved in cosigning a student loan for your child. If you cosign, you are on the hook for paying off your childï ¿ ½s debt. College graduates on average take out $37,000 in student loans, which can be a huge liability if your child doesnï ¿ ½t end up making the payments. 4. Offer a lesson in living cheaply. Remember, your child has probably never had complete control of their finances before and may not know how to budget. Offer tips for saving money, from shopping at thrift stores and taking the bus to using coupons. Likewise, be sure that your child knows about all of the options available to them when it comes to scholarships, how to bargain shop for their textbooks and where they will live outside of the dorms. For students living away from home for the first time in their lives, knowing how to budget and save money is essential. 5. Step in when assistance is needed. Some kids find it helpful for parents to manage their finances while theyï ¿ ½re in school, from how much they should be spending each day on food to monitoring their spending throughout each month. It can be helpful to set up a joint account for your child to keep an eye on their budget. Donï ¿ ½t be overbearing, thoughï ¿ ½college is about life experiences just as much as it is about getting good grades. Whether your savings have allowed you to pay for the majority of your childï ¿ ½s student loans or theyï ¿ ½ll be footing the bill independently, remember that this is a process you canï ¿ ½and shouldï ¿ ½navigate together. Speak candidly with your child about the student loan process and help them when applying for financial aid. Financial understanding is the best weapon against racking up a lifetime of debt. RELATED: 4 things you can do to get ready for student loan repayment About the Author Ryan Hickey is the Managing Editor of Peterson's editing essays and personal statements; and consulting directly with applicants. Applying for student loans can be a stressful and confusing process, especially for kids coming right out of high school with no experience managing their own finances. As a parent, you can help your kids in more ways than just whipping out your checkbook. Hereï ¿ ½s how to help them get started. 1. Sit down and talk about it. Parents and kids alike need to know all that is involved in the student loan process and what is expected of you both during repayment. A lot of students donï ¿ ½t necessarily understand what they are getting into and end up taking out more than they need for the cost of school. Itï ¿ ½s easier than you think for anyone over the age of 18 to take out a multi-thousand-dollar loan, so be sure that your child knows all of the implications of borrowing. 2. Explore different loan options. Itï ¿ ½s important to understand the difference between federally subsidized and unsubsidized loans as well as private loans. Subsidized loans are available only to undergraduate students, and the loanï ¿ ½s interest is paid by the U.S. Department of Education while your child is in school at least half-time, for six months after they graduate, and sometimes during deferment Unsubsidized loans are offered to undergraduate and graduate students alike, and your child will be responsible for all interest during the lifetime of the loan. Interest can add up quickly. Private student loans typically have a higher interest rate and can create more financial stress than federal loans. For example, income-based repayment programs and deferment offered by federal loans might not be offered by private institutions. Also, loan forgiveness might not be applicable to private loans, which can be a big deterrent, especially for those who plan to work in the public service industry. RELATED: 7 things you may not know about student loan repayment 3. Be cautious about cosigning. Know whatï ¿ ½s involved in cosigning a student loan for your child. If you cosign, you are on the hook for paying off your childï ¿ ½s debt. College graduates on average take out $37,000 in student loans, which can be a huge liability if your child doesnï ¿ ½t end up making the payments. 4. Offer a lesson in living cheaply. Remember, your child has probably never had complete control of their finances before and may not know how to budget. Offer tips for saving money, from shopping at thrift stores and taking the bus to using coupons. Likewise, be sure that your child knows about all of the options available to them when it comes to scholarships, how to bargain shop for their textbooks and where they will live outside of the dorms. For students living away from home for the first time in their lives, knowing how to budget and save money is essential. 5. Step in when assistance is needed. Some kids find it helpful for parents to manage their finances while theyï ¿ ½re in school, from how much they should be spending each day on food to monitoring their spending throughout each month. It can be helpful to set up a joint account for your child to keep an eye on their budget. Donï ¿ ½t be overbearing, thoughï ¿ ½college is about life experiences just as much as it is about getting good grades. Whether your savings have allowed you to pay for the majority of your childï ¿ ½s student loans or theyï ¿ ½ll be footing the bill independently, remember that this is a process you canï ¿ ½and shouldï ¿ ½navigate together. Speak candidly with your child about the student loan process and help them when applying for financial aid. Financial understanding is the best weapon against racking up a lifetime of debt. RELATED: 4 things you can do to get ready for student loan repayment About the Author Ryan Hickey is the Managing Editor of Peterson's editing essays and personal statements; and consulting directly with applicants.