By Mary Grace Musuneggi
It’s the time of year when some students are ready to graduate from college, while other students are preparing to graduate from high school and begin their college experience. It is the time of year to look back at the accumulation of college debt…or forward to the loans yet to come. In either case the cost of education can be the largest output of cash for parents (and their children) aside from the purchase of their home.
So for the bad news. The graduating college students who will be venturing out into the world with large college debt may struggle to be gainfully employed in a high-paying job and pay their loans. They will need to put on hold, or should put on hold, purchasing a home or car and starting a family of their own. If not, their debt amasses with mortgages, car loans, and saving to educate their own children. Somewhere in there is also the need to save for their own retirement. And if it is the parents who put their retirement planning on hold to pay for college, catching up may be hard or even impossible.
And then there is the issue of being a co-signer for the college loans. If the student does not pay, the parent has to pay. If the student becomes disabled, the parent has to pay. If the student dies, the parent will still have to pay. And with some college loans, if the co-signer dies the loan may be due in full immediately, or the lender could go after the co-signer’s estate.
Now for the good news! Saving early and often can help. Preparing a thorough financial plan can address many of these needs. Taking advantage of various educational options and financing arrangements can go a long way to addressing the costs. Life insurance on the child could handle the co-signer issue that may arise. Understanding the loan agreements before signing is also important. Considering refinancing options with existing loans may make the payments lower. Researching federal college payment plans to see if loan payments can be adjusted based on the amount of income earned can allow money for other financial needs. Checking with your financial institution to release the co-signed as soon as possible is a definite must.
Planning. Planning. Planning. It all comes down to planning. Start planning when the kids are born. Continue planning as they grow. Don’t put retirement planning on hold. Plan to read and understand everything you sign. Discuss career planning early with the student. Plan to have a plan. Plan to ask for help. We are here when you need us, but remember that we are here sooner, too: consider the benefits of letting us help you put a plan in place before you need us.