Six months ago, getting an envelope in the mail from a choice college was cause for rejoicing. The coveted acceptance letter meant you or your youngster would be embarking on one of life's most rewarding journeys. Now, however, an envelope from the college likely contains a tuition bill, and many families will be figuring out how to pay for higher education.
Most will need some type of financial aid to help pay for an undergraduate degree. In fact, 71 percent of students in bachelor's degree programs have student loans, according to one study sponsored by the White House.
"It's rare for families to put a child through college today without some type of financial help," says Joe DePaulo, CEO and co-founder of College Ave Student Loans. "It's important for families to weigh all their options and make informed decisions about how they will fund their children's educations."
Tips for smart borrowing
"In many ways, student loans are a unique lending product, but they're exactly like every other form of credit in two important ways," DePaulo notes. "First, you'll have to repay the loan at some point. Second, thoroughly understanding what you're signing on for can help ensure you're prepared to repay the debt when it comes due."
The student loan professionals at College Ave Student Loans offer some smart borrowing tips for families facing college tuition bills this summer:
* Weigh all your options. Look into scholarships, grants and federal student loans in the student's name; these should be your first option when budgeting for college. These sources may not cover all college-related expenses. A private student loan or private parent loan might help those with good credit manage expenses not covered by other options.
* Understand the difference between loans. If you decide borrowing is right for your needs, it's important to shop around for the right loan for you just as you would research any other important financial decision. You want to find a low rate, but it's also important to look at a lender's repayment options and find one that fits your budget and your goals. Be aware of application and origination fees, too. For example, College Ave Student Loans have competitive rates and the most repayment options to allow families to build a loan that fits their life.
* Act early. If you do need to borrow, don't wait until the last minute to begin the application process. Getting a student loan typically requires participation from you, the lender, and even your school. Don't risk something slowing down the process as the tuition deadline approaches. Begin the process early so you have plenty of time.
* Understand the relationship between student loans and your credit. Federal student loans don't necessarily require borrowers to have established credit in order to get the loan. Private student loans — like other types of private loans, such as mortgages or auto loans — usually require a credit and income review before you can be approved for the loan. Regardless of whether they are federal or private though, once you take on any student loan, it will appear on your credit report along with your payment history on that loan.
* Understand the role of parents. While federal student loans obtained in the student's name are the student's responsibility, private student loans often require a co-signer who has good credit and income. The co-signer takes equal responsibility to repay the loan if the student borrower can't. Parents may also be eligible for a federal Parent PLUS loan, or a private parent loan through a provider like College Ave Student Loans. Parents who go this route are responsible for the debt. Be sure to shop around for the best loan deal. The College Ave Parent Loan has no origination fee, which means credit-qualified parents often save money over the federal Parent PLUS option.
* Budget for more than just tuition. The costs of college go far beyond tuition. There will be expenses like dorm supplies, books, technology, food, housing, vehicle costs, health insurance and more. Schools factor some additional expenses into their cost of attendance, so private student loans and parent loans can help cover these out-of-pocket costs.
"A college education can be the key to a better life for many people and, by borrowing wisely, families can help ensure their students get a good financial start after graduation," DePaulo says. To learn more about private student and parent loans, visit www.collegeavestudentloans.com.