Planning for college is stressful enough without the challenge of actually paying the bills when another child is in college. And for many families, there can be two or more kids in school simultaneously.
Some key tips for making it out in one (financial) piece:
Mom and Dad: Keep saving for retirement.
There are loans for school. There are also great in-state public schools that are a fraction of the cost of private schools. There are no loans for retirement. If you love your kid(s), you will land at retirement in solid shape, so you will not be a financial burden. And now is the make-or-break time for your financial future.
Make loans a family affair.
It’s not uncommon for families with two, three or more kids to find that all their college savings were consumed by the older kids, leaving the younger kid more reliant on aid and loans. If that’s ever the case in your family, I think the older kids should help the family repay the younger kid’s loans.
Pay loan interest while in school.
If your child has an unsubsidized federal Stafford loan, I want all of you to understand how interest is treated while your child is in school. The government seems to be super nice: No payments are due until the student is out of school. But there’s a catch! The interest payments due on what you borrowed keep accruing, and the government adds those interest costs to your loan principal, so when you start repaying, you have a much bigger balance.
If you can swing it, please make it a priority to pay interest while in school. Maybe a part-time job. Or if there are grandparents, aunts and uncles who are eager to chip in, this is a great idea for them. Broadcast it as a family crowd-funding project. Encourage your child to let family and friends know that it’s a priority to pay the loan interest while in school, and so in lieu of any birthday or holiday gifts for the next four years, any contributions to their Stafford interest fund would be greatly appreciated!
(Read more here about why I want you to steer clear of student loan capitalization costs.)