Co-signing a private student loan for your son or daughter makes financial sense, but you'll want to make known that the repayment of these loans is on their shoulders, not yours.

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Your adult offspring is getting ready to attend college this fall and you’re confident that she will succeed. After all, good grades, excellent study habits, and valuable extra-curricular work while in high school has gotten her this far.

With the good academic record have come several scholarships, a grant, and with the monies saved from her 529 college savings plan, almost enough money to cover costs for the coming academic year. Unfortunately, tuition is a bit higher than expected, dorm costs have increased, and declaring a dual Psychology/Sociology major means she’ll be needing to buy a lot of textbooks plus a new laptop and printer.

Quite suddenly you and your daughter are realizing that she is coming up short financially, not by a whole lot, but about two thousand dollars for the first academic year. You’ve looked at federal Stafford loans and found out your family isn’t eligible, but you know that your daughter can get a private student loan and at a competitive interest rate at that. One small question remains: should you co-sign her student loan?

Like so many families planning to send their grown children off to college in a matter of weeks, you may be scrambling to find the funds to pay for school. Add in more money for gas and food and things may be very tight come this fall.

Co-signing a private student loan might make sense for your family especially when the following applies:

Your child doesn’t have a sufficient credit history to obtain a loan on their own. Even if eligible, the interest rate could be very high come repayment time.

If you have excellent credit, the interest rate for the loan will likely be significantly lower with your name on the loan.

Of course, if you co-sign the private student loan there are some risks involved, namely:

If your child fails to repay the loan, then you’re responsible for making payments.

If you choose to co-sign the student loan, make sure that you have copies of the paperwork on hand. You need to know when the loan is due, to whom payments are made, and you need to get copies of quarterly statements to verify payment.

Although your son or daughter may be showing a lot of responsibility right now that doesn’t mean that they won’t make a bad decision or a mistake that could ding your credit. By co-signing a private student loan you can save your adult child hundreds even thousands of dollars in interest charges, but there are always risks involved. Make certain that your child understands their responsibilites to repay their loans, keeping a burden off of your shoulders.

Tags: college financing, college loans, private loans, private student loans, school loans, student lending, Student Loans

When it comes to paying for higher education, many students are finding that they are coming up short when they take a look at their tuition bill. The price of higher education continues to surge, far outpacing the cost of living at many institutions.

Lately, college students have received some good news when it was revealed that the interest rates for various college lending options has actually dropped. For example, the federal student loan program, called Stafford Loans, is leading the way by dropping from 6.8% to 6% effective July 1^st for their subsidized loans, a particular type of loan available for all students, but often favored by those with a low-income.

Over the next three years subsidized Stafford loan rates will continue to drop until they bottom out at a rate of 3.4%. These rates apply to newly written loans, but not for loans previously issued. Unsubsidized student loans will continue to carry the 6.8% rate.

Students who have already completed their education and are in the process of paying off their student loans have received some welcome news too. Specifically, those students with federally guaranteed student loans issued before July 2007 are learning that now is an excellent time to consider consolidating their loans under the government’s Direct Loan program.

If former students consolidate their loans before the next rate change kicks in, they’ll pay a fixed rate of just 4.2% for the life of the loan. This is down significantly from the most recent 7.2% figure thanks to rate cuts made the Federal Reserve Bank over the past year.

Grads who fail to take action will continue to see their rates adjusted annually, depending on market conditions. Clearly, for people who want to get a handle on their debt, consolidating now makes sense.

For students taking out private student loans, there is good news for them too. Annual borrowing limits have been raised to $45,000 and rates with various lenders remains competitive. Just as they are with Stafford Loans, payments are deferred until after you graduate, allowing you to concentrate on getting good grades and finding the right job.

Lastly, the amount of money qualifying students can get from a Pell Grant for the coming school year has been raised to $4731, a $421 boost over the previous year. Federal Pell Grants are based on a family’s financial need and because they are a grant, the monies are not paid back.

Yes, the cost of getting a higher education continues to rise, but thanks to changing market conditions loan plans and other assistance options is making college more affordable for millions of Americans.

(Source: Los Angeles Times)

Tags: college loans, Federal Pell Grant Program, federal student loans, private student loan, stafford loans, Student Loans