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Home » College Affordability and Preparedness » The Righty Way to Use Student Loans to Pay for College

The thought of financing a college education can be stressful. But parents and loan experts say the borrowing process doesn’t have to be scary.

Chris Jennings’ daughter Alessandra is a freshman at a private college in the Northeast. He was surprised by how quickly tuition payments were due. “My daughter said the payment was due in July,” he says. “It was already June.”

Jennings started researching loans on the internet and found CommonBond, a financial services company that prides itself on offering competitive interest rates, advanced technology and award-winning customer service. He applied online and is a co-signer on his daughter’s loan.

“I’m setting up my child to succeed,” says Jennings, who’s happy to help pay for his daughter’s education and build her credit at the same time.

“Don’t panic,” Jennings advises other parents. “College isn’t as expensive as you think it is.”

Getting started​​​​​​​

The College Board says this year students at a four-year public college are paying an average price of $20,770 for tuition and fees, plus room and board.

“It doesn’t have to be an overwhelming process,” says Pete Wylie, CommonBond’s vice president of in-school lending.

Some students apply for and receive grants or merit-based scholarships, both of which don’t have to be paid back. The rest of the expenses are typically covered by loans, which do need to be repaid. Loans can cover the full cost of college including classes, books, room and board. Or students can get a loan to cover just the basics: tuition only.

Loans are financed year by year. The bills are paid after the student graduates.

Better lending

CommonBond was started by students based on their experiences getting student loans. They wanted better customer service and guidance during the process so they created an alternative to traditional lenders.

“We offer a lot of flexibility,” says Wylie. “We offer 5, 10, 15-year rates and multiple payment options.”

CommonBond offers loans for undergraduate students enrolled at least half-time for any bachelor’s degree, at more than 2,000 not-for-profit schools. They require students to apply with a cosigner, such as a parent. The cosigner promises to pay the loan balance if the student doesn’t pay.

After two years of payments after graduation, a student can apply to release the cosigner from the loan. The lender’s loans have up to a 2 percent origination fee, depending on state of residency. There are no prepayment penalties and they offer forbearance to students who encounter economic hardship after graduation.

Financing a child’s education can benefit others too. CommonBond makes a “Social Promise” that for every loan they fund, they’ll also pay for the education of a child in need in the developing world. Already, almost 10,000 students — many of whom are in Ghana — have had their educations funded through that promise. The company also invites borrowers on an annual trip to Ghana to see its Social Promise in action.

Planning ahead

Bruce Dooley has been saving for his son Jordan’s college education since the incoming University of California San Diego freshman was a baby.

“We wanted to make sure our son is coming out of school debt-free,” says Dooley.

However, as the cost of college increased, Dooley realized he would need to take out loans to cover the tuition. He plans to pay off the loans in four years.

Not all parents are as prepared as Dooley but there’s still time to figure out financing.

“People don’t look at this as a multi-year process,” says Kalman Chany, author of “Paying for College Without Going Broke” and president of Campus Consultants, a financial aid advisory firm.

He cautions parents that the first year of a student loan — based on family income and qualifying rates — becomes the template for the next few years’ loans.

“Plan ahead so there’ll be no surprises,” says Chany.

Research and planning can help families gain a clearer picture of their student loan needs. Then finding the right student loan and loan provider may be easier than initially thought.

Kristen Castillo, [email protected]

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