Student Loans

Depending on the type of loan that is offered to you in your financial aid package, some will be private loans, or government loans.  Some can be taken out by students, and some by parents.  Parents often consider home equity loans in order to send their children to college.  A home equity loan is tax deductible, and the interest significantly lower, because the home is used as collateral. 

Discuss carefully who will take the burden of the student loan.  If parents take out the loan, that will probably mean the loan payments start immediately.  Whereas if the student takes out the loan, then the payments begin after graduation.  The government covers the interest while the student is in college.  The reason why the government pays for financial aid is because the US government sees education as a long term investment.  If a person earns more over their lifetime, then the government collects more tax revenue.  A college graduate also has a lower rate of unemployment. 

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Tell your children who will be responsible for the loan repayment.  If you tell your child that they will responsible for their own loans, they might choose an inexpensive college, or one that gave them a better financial aid package. Do not shoulder the burden of college tuition at the stake of your retirement.  Your child is in a better place to repay loans after graduation than you will be when you retire.

Upon gradation the college graduate will begin loan repayment within a few months.  Depending on the interest and payment scheduling, the bill will probably come out to a few hundred a month for the next ten years.  Pay off the loan faster then is required!  The last thing you want to do is to be paying for a student loan when you have your first child, and want to save for a down payment to your home (yes, this will most likely apply to you).  Live with your parents for the first few years if necessary.  Housing is extremely expensive, save the money and pay off your loans.