By Mick Bernard
Be realistic about student loans: Students are emerging from college mired in debt that cripples their ability to pay bills once they graduate. Student loan debt, if not prepared for carefully, can limit a graduate's ability to accept their dream job if it is accompanied by a low salary. Parents and students should sit down at the beginning of college and do research into future earnings in the student's ideal job field. (Sites like Payscale can help with this.) Some experts advise that your TOTAL student loan debt should not exceed what your student can expect to make in their first year out of school. However, be sure to take unpaid internships, low starting salaries, volunteer experiences, and possible unemployment into account when planning this far ahead. Remember, starting 6 months after graduation, the student loan bills begin to arrive.
Many students and their families are shying away from applying for student loans because of the recession and news stories reporting banks are cutting their loan programs. However, federal funding for student loans has increased in recent years. Federal aid does require the FAFSA form, which can be time consuming and complicated to fill out, but the few additional hours can pay off substantially in the future.
Share the burden: Parents, involve your students in the loan application process. Have them fill out all the FAFSA forms, shop for loans, compare rates and work on the applications. Students are responsible for repaying these loans, so be sure they are on board from the start. As college professors would say, use this process as a teaching moment- nothing comes for free. Age 18 is a great time to start wrestling with federal tax documents.
Use credit cards with caution: College students often fall victim to the siren call of "free money" of credit cards. Legislation passed by the Obama administration will limit some of the predatory techniques used by credit companies to target naïve college students. These regulations prevent credit card companies from sending pre-approved cards to students who have not requested them, and prevent the distribution of "tangible items" like sweatshirts in exchange for signing up for a card on or near college campuses. It also requires students under the age of 21 to have a parent or adult co-sign for a card, or to prove they have independent means of paying for that card. Using cards to build credit gives students a jump on other credit customers, so long as they are building GOOD credit.
Set boundaries: Regulations will help protect students from credit card companies, but no law can protect a student from their own irresponsible behavior or poor choices. Students and parents should sit down at the start of college and discuss the proper use of a credit card. Parents often want students to have a credit card available to them "in case of emergency," but it is up to parents to hold the line on what consists of an "emergency." The time to have this conversation is before the first maxed out bill arrives and arguments about the necessity of football tickets take on epic proportions.
Some families create a 4-year payment plan that involves your student. For example, freshmen year, parents agree to pay for all expenses, which allows a student to settle in, adjust to college life, and find the best on-campus jobs. When sophomore year arrives, students begin to shoulder a small portion of their expenses, like books, or food costs. By the time the student reaches senior year, they will have a more realistic idea of what it takes to manage a budget and make ends meet.
The best time to learn: College is the best time for students to learn to handle their own expenses. Some parents sit down with students and establish a budget for the upcoming year, pledging to cover that amount of expenses and no more. Others may give their students a semester allowance and expect the child to budget or cover any additional expenses. These students are often much more budget conscious and prepared to handle their own financial needs upon graduation than students given a blank check.
While every parent hopes to protect their child from the hard lessons of life, college can also act as a testing ground. If a student runs up the credit card bill on DVDs and expensive clothes, make it clear you expect them to pay it off on their own. Small stumbles at the age of 18 will be a mere blip on a student's fledgling credit report. A little tough love at this stage of life can help students learn responsible behavior before bad habits destroy their credit ratings.
Many students and their families are shying away from applying for student loans because of the recession and news stories reporting banks are cutting their loan programs. However, federal funding for student loans has increased in recent years. Federal aid does require the FAFSA form, which can be time consuming and complicated to fill out, but the few additional hours can pay off substantially in the future.
Share the burden: Parents, involve your students in the loan application process. Have them fill out all the FAFSA forms, shop for loans, compare rates and work on the applications. Students are responsible for repaying these loans, so be sure they are on board from the start. As college professors would say, use this process as a teaching moment- nothing comes for free. Age 18 is a great time to start wrestling with federal tax documents.
Use credit cards with caution: College students often fall victim to the siren call of "free money" of credit cards. Legislation passed by the Obama administration will limit some of the predatory techniques used by credit companies to target naïve college students. These regulations prevent credit card companies from sending pre-approved cards to students who have not requested them, and prevent the distribution of "tangible items" like sweatshirts in exchange for signing up for a card on or near college campuses. It also requires students under the age of 21 to have a parent or adult co-sign for a card, or to prove they have independent means of paying for that card. Using cards to build credit gives students a jump on other credit customers, so long as they are building GOOD credit.
Set boundaries: Regulations will help protect students from credit card companies, but no law can protect a student from their own irresponsible behavior or poor choices. Students and parents should sit down at the start of college and discuss the proper use of a credit card. Parents often want students to have a credit card available to them "in case of emergency," but it is up to parents to hold the line on what consists of an "emergency." The time to have this conversation is before the first maxed out bill arrives and arguments about the necessity of football tickets take on epic proportions.
Some families create a 4-year payment plan that involves your student. For example, freshmen year, parents agree to pay for all expenses, which allows a student to settle in, adjust to college life, and find the best on-campus jobs. When sophomore year arrives, students begin to shoulder a small portion of their expenses, like books, or food costs. By the time the student reaches senior year, they will have a more realistic idea of what it takes to manage a budget and make ends meet.
The best time to learn: College is the best time for students to learn to handle their own expenses. Some parents sit down with students and establish a budget for the upcoming year, pledging to cover that amount of expenses and no more. Others may give their students a semester allowance and expect the child to budget or cover any additional expenses. These students are often much more budget conscious and prepared to handle their own financial needs upon graduation than students given a blank check.
While every parent hopes to protect their child from the hard lessons of life, college can also act as a testing ground. If a student runs up the credit card bill on DVDs and expensive clothes, make it clear you expect them to pay it off on their own. Small stumbles at the age of 18 will be a mere blip on a student's fledgling credit report. A little tough love at this stage of life can help students learn responsible behavior before bad habits destroy their credit ratings.
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