Parents’ Role in Taking Education Loans
Even before you realize, your child who was in high school would be getting ready to send college applications and will be approaching you with future career concerns. As a parent, this is one of the most important times of your life. Your child is not financially independent, so you have a big role to play in securing their future. Finding the right financial aid and underwriting your child’s education is your responsibility.
Why consider an education loan?
Education loans are financial aids designed exclusively for students and parents to pay educational expenses. When you take a loan from an accredited bank or loan provider, you are legally obliged to repay the loan according to the terms set by the lender. Unlike most financial options, education loans provide great flexibility, and have more manageable terms and conditions. They are more affordable, have lower interest rates, and have deferred repayment options.
What is a parent’s role in taking an education loan?
While students are the borrowers of education loans, parents’ support in the process is inevitable. Every lending institution foresees a probability of non-repayment of the loan by the student, and would need securities (like mortgages, guarantee, etc.). As a parent you would want to give your child the best chance for a financially sound future, you can be the co-borrower of the loan. Thus, you can support your child’s education loan application. Your liability as a co-borrower will be co-extensive with the borrower (your child). As the banks may require documentary proof to establish your relationship with the student, you must be ready with the same, at the time of application.
As studying in a foreign country can be expensive, your son or daughter may need a huge sum as tuition fee to pursue their education. Banks lend higher amount only if one or both the parents agree to be co-borrowers and present a tangible collateral security of a specific value. As students don’t have a credit history, the banks would consider the parents’ credit worthiness for granting education loans.
Remember – your child may not have the proper understanding about loan procedures and banks’ terms and conditions. Incorrect and incomplete information may lead them to get trapped in the world of unsuitable education loans. As a parent and a co-borrower, you must do your research and choose the best education loan for your child. This will help them avoid unexpected problems when re-payment process starts.
One of the greatest advantages of education loan is the income tax benefits that it offers during the repayment. If chosen wisely, education loans are undoubtedly one of the best financial aids for your children, in this era where higher education abroad is costlier than ever.