We’ve all seen the ads on television, “Call today and you can be approved for a student loan for up to $40,000.00 and get it in as little as a week.” The catch of course is that the student has to have a co-signer. There are loans available without a co-signer but the interest rate is comparable to high interest credit cards. As my son recently found out some of them won’t give students a loan at all without at least forty-eight months of credit to check in their own right regardless of a co-signer.

These private loans are usually tied in to some bank or another and the interest rates are high even with a co-signer, although not nearly as high as without one, and they are a variable rate, which means they can go up at any time. Always read the fine print (I found it at the bottom of the home page) and the questions and answers page if available before signing up for anything.

One thing parents (or other co-signers) should know is that if they co-sign it is on their credit record as well as the student’s. If any loans are applied for by the co-signer it will point to up on the credit report and may interfere with their ability to obtain a loan. At the end of the deferral period, usually six months after graduation or the student stops going to college, the total amount owed is astounding (I saw one that came out to nearly three times the amount borrowed.) Consumers should also be aware that if a bankruptcy occurs, student loans are exempt from being erased; in other words, you can’t get out of it by declaring bankruptcy.

The U.S. House of Representatives passed a bill (The College Opportunity and Affordability Act) on February 7, 2008 to try to make obtaining student loans less expensive for students among other improvements. They are trying to make it so that private student loaning institutions/banks are required to give students information on federally backed loans that are available to them. They want to create a website comparing colleges both public and private so that they know the costs involved. They seek to ensure that colleges and lenders adopt a code of conduct to prevent the schools from profiting from steering students towards the higher rate private loans. They seek to protect students from aggressive marketing from the private student loan programs, and seek to construct it easier to apply for federal aid and loans. To read the bulky contents of The College Opportunity and Affordability Act go to: http://edworkforce.house.gov/micro/coaa.shtml. This bill is awaiting the signature of the President.

Loans are a necessity for college students these days. Being aware of the fine print, the terms and conditions involved, and the finance charges can save parents and students a lot of money in the long run.