A U.S. News & World Report study showed that 43% of parents surveyed regretted using student loans for their children. This number shows a shocking amount of U.S. citizens either aren’t able to save or have a poor understanding of how do personal loans work, with some families being left under insurmountable levels of debt.
If you’re a parent with children who haven’t yet gone off to college, you might wonder what options are available to pay for their education. Here’s what you should know.
Option 1: Student loans
The most common way to pay for college is through student loans. However, student loans come with several disadvantages. For one, they can have high-interest rates that can add up quickly. Additionally, student loans often have lengthy repayment periods, meaning you’ll be paying off your loan for a long time.
Option 2: Govnerment aid
There are other options for financing your child’s education as well. For example, if your child is eligible for Pell Grants or other scholarships, you might be able to use those funds to pay for their education instead of taking out a loan.
Pell Grants work differently than other forms of student loans. Instead of tying your loan payments to your income, Pell Grants are based on your financial need. This means that even if your income goes up after you take out a student loan, you’ll still be able to pay it off.
Option 3: Private loans
If none of the above options work for you, you can consider taking a private loan. However, be aware that these loans have higher interest rates and can be more difficult to get approved for. Private loans often have longer repayment periods than public or student loans.
Option 4: Tax-deferred savings accounts
529 College Savings Plans are another option for financing your child’s education. These plans allow you to put money away in a tax-deferred account, which will help you save on taxes when you withdraw the money for your child’s education. They can also be used to pay off up to $10,000 in student loans thanks to the 2017 Tax Cuts and Jobs Act.
What to do if you’re having trouble paying off your children’s student loans
If you’re having trouble paying off your children’s student loans, you can do a few things to get ahead of the debt. First, work with a financial advisor to create a debt repayment plan that fits your situation. This could help reduce your monthly payments or take a longer loan term to pay it off faster.
There’s also the option of applying for student loan forgiveness that President Biden created via executive order in 2022. Some parents might qualify for relief even if it was their child attending school and not them. The US Department of Education’s website will have more details on eligibility requirements.
Finally, consider seeking professional help through a Debt Reduction Plan or Debt Management Agreement. These programs can help you get on track with your student loan payments and reach your goal of eliminating the debt altogether.
The bottom line
No matter which option you choose, it’s essential to ensure that you’re fully informed about the costs and benefits of each option before making a decision.