6 Tips to Prepare Your Kids to Avoid College Loans
Student loans often get a bad rep, but for a lot of individuals, they can be the only way to pay for college. It’s the biggest catch-22. At least 1 in 3 borrowers actually regrets taking out college loans, and that’s not all that surprising. Plus, 46% of millennial borrowers don’t want their own children to end up in the same boat as them. However, there are other ways to pay for college. You just have to know where to look.
6 Top Tips to Avoid College Loans
To that end, here are some top insider tips for helping your children prepare for college education without college loans.
Be smarter with your savings
According to Melissa Sotudeh, a financial planner and director of advisory services at Halpern Financial, the best way to create a habit of saving is to make note of it in the monthly budget. No matter where you start, try adding more to your contributions, as you gradually gain more solid financial ground.
$25 a month will definitely not cover all four years of college, even at an affordable state school. But you will have eventually built up an amount that will bring even a cheaper priced university into the fold of possibility. It will also lower the potential amount the student might have to borrow.
Look for scholarships and grants
There’s nothing better than free money, and this goes for everyone, not just students! Grants are usually aid that’s based on individual financial need. Scholarships, on the other hand, are often merit-based aid. The best place to find scholarships and grants is to look for them online.
Try to focus on free grants and scholarships only, as the paid ones are usually scams.
The internet is not the only resource. Your college financial aid office or high school counselor’s office can be a great place to look for scholarships. The same goes for private institutions. For example, the Florida PTA gives out $2,000 scholarships to high school seniors who qualify.
Consider doing part-time work
If you want to reduce your overall debt, the best way to do so is getting scholarships and saving up for college. Each dollar saved, and every dollar won in scholarships, is one dollar less that you’ll have to borrow.
In other words, every little bit of money saved or won can help. Socking away your money earned from a part-time job will definitely not cover all of the college expenses, but it can make a nice little financial dent. Some companies even offer tuition assistance to students.
Teach kids basic personal finance management
The best way to develop financial independence in young people is to actively teach it to them. According to one estimate, students who graduated high school in the states with mandatory financial education were more likely to have better credit scores by the age of 22.
For younger children, you can start by teaching them the concept of spend/save/give. Whether kids receive four quarters, or $100, they can spend some, then save some, and finally donate some. It’s a financial exercise that’s designed to solidify delayed gratification and stop impulsive spending.
You can also tell them of the value of dedicated credit cards. For example, a Banana Republic credit card can help them take care of all their clothing needs, without costing an arm and a leg.
Budgeting is another side of the solution. Sit down with the kids as soon as they start earning any money from an after-school job, or an allowance. How much are they making? Have they racked up any bills? The basic idea is to lay the foundation of not spending more than they make. This is something that’ll come in handy once they start living on their own.
Whenever they’re preparing to leave for college, jot down some numbers with them, which will let them see exactly how much further they can take their money with a little financial smarts. Used textbooks, carpooling and meal planning, can help them stretch their money during college and after.
Consider state schools and community college
Full-time students, at public two-year colleges, receive on average, more than enough grant aid as well as federal tax benefits to cover their tuition fees. Starting your higher education journey at community colleges and knocking out the basic education requirements before transferring to one of the many state schools can be a strong way to reduce the overall college expenses.
Ask family and friends to contribute
Don’t be afraid to ask friends and family members to play a role in the child’s future. It’s something your child will be grateful for as soon as they start high school graduation. The total savings goal should be almost 80% of total college costs. Another option is to start crowdfunding.
Setting up a crowdfunding page for your child can encourage family and friends to donate.
Kids paying off student loans quicker, or avoiding them altogether, can work massively in their favor, in the future. It’ll also help build essential leadership skills, which will make them self-sufficient as well.