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This is the third in a series of articles examining the impact the high cost of college and the student loan crisis are having on families. RSC Your College Prep Expert is dedicated to making college affordable to all families. See how we do it here.
The Meade family knows full well the impact college tuition can have on family finances. When you live in a low-income, single-parent household with six children – all of whom want to go to college – you spend a lot of time worrying about how you’ll pay for it.
Ms. Meade had heard the horror stories – children forced to live at home until they’re 30, parents taking our second mortgages, grandparents giving up retirement income – all so the family could make ends meet while paying off tuition, student loans and sky-high interest rates. She didn’t want it to happen to her family.
Impact of Student Loan Defaults
· 15% of students from private and public colleges default on loans (it’s twice that for-profit colleges).
· The average 2011 college graduate pays $250 per month in student loans (about the average payment for a new car).
· Between 2006-2011, 63% of borrowers failed to make payments without some form of interruption.
When a student defaults on a loan, it affects their credit. Unfortunately, getting out of a student loan by filing for bankruptcy is nearly impossible, and so unlike other loans, it can negatively impact your credit for decades. In so doing, it affects your ability to get other loans, such as a mortgage or car loan. It can even affect your ability to get credit cards or favorable interest rates. And if your monthly student loan payment is high enough, it can hurt your ability to make everyday purchases, like food, clothes and personal items.
Students should note that, in today’s tough job market, prospective employers often check your credit score to see how responsible you are with money. Defaulting or falling behind on your loan can prevent you from getting a job, something no graduate wants to hear when so many recent grads are unemployed.
A Parent’s Role in Paying for College
Ms. Meade is like a lot of parents. She wants to pay for as much of her children’s education as possible, but with minimal income and dwindling savings, that’s difficult. That could mean turning to borrowing, like the government’s Parent PLUS loan or those offered by private lenders. A recent study from Sallie Mae/Ipsos indicates that parent borrowing is up 15% from 2010-11 to 2011-12, while the amount they spend from their savings is down 32%.
Parents are simply running out of resources to pay for college for their children.
This has led to some very bad financial decisions, including taking out second mortgages and dipping into their retirement savings. It’s also led them to cancel vacations, take second jobs, work more hours, delay retirement and borrow from family members.
Ms. Meade realized that it’s not just students getting crippled by student debt, it’s parents, too. And the impact isn’t limited to just a few years. It starts long before college as parents save as much as they can. It then multiplies while the student is in college and after they graduate. All told, parental college debt can also last for decades.
Financial Aid Help for Parents
The Meade family enlisted the help of RSC’s college prep program to help figure out how she and her children were going to pay for college. The counselor explained to Ms. Meade the loan options she was facing, but also promised to get her students the most financial aid possible.
RSC’s financial aid staff:
· Provided her a list of top financial aid colleges. Three of her five college-age children were accepted at such colleges.
· Completed the family’s FAFSA and other need-based financial aid forms so that the information provided to the federal government and colleges was consistent and accurate.
· Reviewed every college financial aid offer and conducted appeals when necessary.
In the end, Ms. Meade was extremely happy with the results, and after seeing how much she saved on college expenses thanks to RSC’s expertise, she signed up her second child for the program. To date, Ms. Meade has enrolled five of her six children in RSC’s college prep and financial aid program.
And the sixth? He’s still too young, but Ms. Meade says as soon as he’s ready, she’s enrolling him, too. After all, when you find a program that’s both personally and financially rewarding, you stick with it.
Today, the two oldest have already graduated college, one from the very prestigious Gonzaga University. Ms. Meade says she’s sure the rest of her children will get a great education, too – at a price they can afford, thanks to good planning and advice from a college prep expert!
Next week: Going to the Moon: WhyCollege Prep Requires a Long-Range Plan
For more information on the RSC program, call 800-898-4636 or click here to enroll today!
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