By: Reyna Gobel
Parents, at this point you know if you need extra money to pay for college this fall. You also likely know which student loans you’re borrowing. If borrowing parent PLUS loans, you’ve likely signed a promissory note already. However, you need answers on payment due dates, co-signer responsibilities, and what to do if your student needs more money than you anticipated.
We compiled answers to the top questions on student loans we get from parents:
When payments are due
Parent loans as opposed to loans to students may require payments before a grace period after college ends. Grace periods are a period of time after graduation where students don’t have to make payments. Federal parent PLUS loans require a deferment request in order to get a grace period. Private students loans can set their own rules for when payments are due. Parent and student private loans have different payment due dates.
Whether to pay interest while in school
Sometimes it makes sense to pay interest on student loans while your student is in college. Other times it doesn’t. The time it’s absolutely a bad idea is if you think you or your student will qualify for Public Service Loan Forgiveness, a program from the federal government where the remaining federal student loans balances are forgiven after 10 years of on-time payments while employed for 10 years with a public service employer. Paying down these loans reduces the amount forgiven. Other times it’s a bad idea is if the money paid in interest could instead be used to borrow less next semester.
Co-signer responsibilities and rules
If you co-signed a private loans for your students, it’s a good time to check out co-signer responsibilities and rules. For instance, graduates may qualify for cosigner release after 12 to 24 payments. You also want to see if cosigning affects your student’s ability to get a temporary payment break for situations such as unemployment. The reason why this is important is if you build up your savings account to handle payments you may be responsible for in the case of unemployment for the future graduate and during the cosigner release time frame. After all, your credit is affected by the loans you cosign, too.
Back up options for more cash
Hopefully, the amount you and your student borrows covered needed expenses. To pre-empt this possibility, carefully review budgets with your student on a monthly basis. Helping them budget better means you can borrow less.
How student loans and refunds are distributed
Student loans are generally distributed directly to the school. Then, refunds in excess of tuition, fees, room and board may be issued either to the parent or the student. You should double check with the school and the lender for how this works at their institution. Because your student can get classes cancelled, etc. If loan payments aren’t paid, you’ll want to do due diligence to call lenders and servicers to make sure payments are on their way at least a week or two before tuition and other charges are due. The school financial aid office can also keep classes from getting cancelled if federal student loans are on their way if notified in writing and everything is agreed to. Fill out any forms requested.
Getting approved for student loans is just step one of the financial aid process. Afterwards, plan for repayment, coordinate budgeting with your student to avoid additional borrowing that semester, and follow through with the distribution process. An hour of planning now will save you several tylenols worth of headaches later.