High school seniors go from choosing a prom outfit one day to taking out student loans to pay for college the next. Many graduates who are struggling with student loan debt just didn’t fully understand how student loans work. As parents, it’s time to step in and have a college money talk with your kids. While 92% of parents talk their kids about relationship issues, a study reports that only 9% of parents talk to their kids about student loans

For parents of high schoolers, it’s never too early, or too late, to talk to your kids about borrowing student loans. And if you haven’t saved for college, it also isn’t too late – every dollar helps. Here are six things you need to tell your kids about student loans: 

You will have to pay all of these loans back, plus interest. 

Every dollar that is borrowed needs to be repaid. Now is the time to explain how interest works, both on student loans and credit cards. There are some federal loans (subsidized) where interest doesn’t add up while you’re in college, but it will for all other loans. Interest on unsubsidized Federal student loans and private student loans also works the same way as it does on a home mortgage or auto loan. 

There is a difference between federal and private loans. 

When it’s time, fill out the FAFSA with your kids. This will show what type of federal student aid you’ll receive, including grants (money you do not have to pay back) and federal student loans. Federal student loans are loans borrowed from the government, unlike private student loans, which are from a bank or other financial institution. Federal student loans are a better option because they come with many benefits, such as low fixed interest rates, options for income-based repayment plans and the option to have part or all of the student loans forgiven

You’ll have to budget after graduation. 

Most loans have a six-month grace period and then the bills start coming. Explain that these loans will be a mandatory part of their post-college budget. Making student loan payments every month might mean you don’t live in as nice of an apartment as you’d like, go on vacations or go out to dinner with friends as much.  

Do everything you can to keep college costs low to avoid unnecessary debt. 

Before spending one dollar of student loan money, you need to ask yourself, is this a necessity. Student loans are used to cover tuition, fees, room and board and living expenses while you’re in school. Once your college is paid, you shouldn’t use the extra money for clothes, going out with friends, vacations, a new cell phone or anything else that isn’t 100% a necessity. Every student loan dollar will cost you about two dollars by the time you repay the debt. Find ways to cut college costs whenever you can, including buying used books instead of new and keeping food costs low. 

There are severe consequences of student loan debt. 

Depending on the amount of your student loan debt after graduation, it could delay your financial goals, including buying a home or a new car. It could limit your ability to travel and to save money for retirement. 

Not paying a student loan has severe consequences as well. 

It can cause a great deal of damage to your credit, which can impact your job search (since employers may look at your credit report) as well opening any new accounts, including credit cards, a car loan and even cell phone providers. 

There are several ways to avoid student loans. 

You can avoid student loans by applying for scholarships, filing out the FAFSA, choosing an affordable college, graduating on time, working while you’re in school and sticking to a strict budget. For students early in their high school career, they can take AP classes for college credit and keep their grades up for scholarships. Parents should also save as much as possible before college, since it is cheaper to save than to borrow.

If your kids are already in college and you didn’t have this talk, do it now. They can still walk away with less damage than not having this conversation at all. If you aren’t familiar with student loans, learn together. Use our student loan calculator to calculate monthly loan payments, total payments, total interest paid and payment schedules for federal student loans, private student loans and parent loans.

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