Education & Community

• Planning & Saving
• Credit & Debt
• Forums
• Debtbusters Blog
• Financial Information Blog
• CESI Company Blog
• Community Guidelines

So your kid will be graduating from high school this year and the college acceptances have already started arriving. The question most parents ask at this point is “How am I going to afford it?”. Well with the rising cost of education it is a very good question to be asking yourself. You don’t want to take on a payment that is not affordable and you certainly don’t want your kid graduating from college with an impossible debt load. Below you will find some helpful tips to help you and your kids pick the right college and save some money on student loans.

1. Calculate your portion: Comparing the grants (free money) received and the tuition for that first-choice university more than likely you will find a big gap. You want to fill this gap with as much cash as possible without having to use only student loans. Review your budget and see how much you can afford to free up. You don’t want to take from retirement accounts because that could, in turn, jeopardize your own future.
2. Calculate your maximum debt load: Students can borrow anywhere from $5500 to $7500 in federal student loans and parents can fill the rest with PLUS loans. There are several ways to figure out what you should be borrowing. One way is to estimate your child’s starting salary after college based on their major and not let them borrow more than that amount for their college education. Another way is to figure out what the monthly payments would be and cap it and what you could afford to help them with. In today’s economy you never know how long after graduation it will be till they land that first job. If you are using the second method,  try to keep all of your payments such as student loans, mortgage, and car payments under one third of your gross monthly income if you are a younger parent and under 10% if you are nearing retirement.
3. Get the most aid: If using the above calculations still aren’t enough to fill that gap then you may want to ask the financial aid office for second look especially if your situation changed since you originally filed the FASFA. If all else fails consider sending your child to a less expensive school such as a community college to start with and then transfer into the college of choice to save you money.

I hope this information will help you  to make wise decisions when it comes to your child’s education. If anyone has any other suggestions please share them with us.

Source: http://money.cnn.com/2010/04/07/pf/college_debt_loans.moneymag/index.htm