Student Loans & Borrowing
01.Federal vs. Private Loans
If savings and aid are insufficient, student loans fill the gap. Federal loans are issued by the government and have fixed interest rates and flexible income-driven repayment plans. Private loans are from commercial banks, require a co-signer with good US credit, and are much riskier.
02.The Burden of Debt
Average college graduates carry significant student loan debt. Educate your children on borrowing responsibility: they should never borrow in total more than their expected starting salary after college.
03.Co-signing Risks for Parents
As parents build credit, they may be asked to co-sign private student loans or take out 'Parent PLUS' federal loans. Understand that you are taking on legal responsibility for this debt, which can delay your own retirement planning if your child struggles to pay.