The pandemic cast a shadow over the finances of many American families, and the rising cost of college remains a roadblock for young adults who want to attain higher education. But despite the challenges, parents are more confident about funding a college education for their children in 2021, according to a recent survey.
Fewer families feel overwhelmed by the cost of college this year compared to last year — 55% in 2021 versus 71% in 2020, the survey of 1,045 parents conducted by College Ave Student Loans and Barnes & Noble College Insights found.
Parents are utilizing a number of routes to finance a college education for their children, from savings accounts to student loans. If you're considering taking out a private student loan for your college student, you can get prequalified on Credible to see estimated rates and terms without affecting your credit score.
1 in 4 parents will borrow student loans to help pay for college
The first step to financing a college education typically starts with submitting the FAFSA form to determine if your student qualifies for financial aid. After that, about a third (34%) of parents will cover costs by dipping into savings, while 16% will use investment assets and 10% plan to appeal their financial aid award letter. Nearly a quarter (24%) said they would borrow student loans on behalf of their children.
The good news is that private student loan interest rates remain at record lows. Rates on 10-year fixed-rate loans averaged 3.50% among borrowers with credit scores of 720 or higher who selected a lender on Credible's online loan marketplace during the week of June 14, 2021.
Make sure you get the lowest rate possible on a private student loan for your child by shopping around through multiple lenders on an online marketplace like Credible.
Many parents surprised by cost of tuition, room and board
Many parents felt "sticker shock" by the price of a university education, the survey showed. But they were less surprised in 2021 than they were in 2020.
Although it's commonly known that college is expensive, this suggests that it's more costly than parents had been planning for.
Between FAFSA forms and scholarship and grant applications, you may still not get the money you need to finance your child's education. In this case, you may want to consider borrowing student loans. You can use Credible's student loan repayment calculator to estimate your monthly payments.
How to know which type of student loans are right for your child
Student loans fall into two categories — federal and private. Federal student loans come with protections like income-driven repayment plans, loan forgiveness and hardship forbearance. However, federal loans may not completely cover the cost of a college education.
If you still need to borrow more money to pay for school, consider private student loans. It's a good time to borrow since interest rates are low and you can shop around for the lowest possible rate on private loans using an online marketplace like Credible.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at email@example.com and your question might be answered by Credible in our Money Expert column.