What parents need to tell teens about student loans

PROVO — It has become something of an annual tradition, torrents of student loan “horror stories” flood the Internet just months after graduation, many written by students who say they never realized their debts would follow them for life.

Among other variables, parental support is a key indicator for post-college success, according to research by BYU professor Larry Nelson.

“It's hard for a young person trying to transition into adulthood without parental support,” he said. “Our research shows that the parent-child relationship is one of the strongest indicators of whether young people will flourish or flounder in the transition to adulthood.”

Discussions about paying for college should begin during high school, Nelson said, when students can take full advantage of classes, extracurricular activities and other resources that could improve their odds of obtaining a scholarship. Research suggests that, high schoolers should avoid working more than 15 hours per week during the school year. Students who take on more work are less able to participate in school activities, and their grades suffer, Nelson said.

“There are settings for teenagers to be in where the outcomes are worth more than a minimum-wage income,” he said.

Typical workplace settings for most teens aren't conducive to developing career-oriented job skills, Nelson explained. If teens so choose, they can take on additional hours over the summer and save that money to defray college costs.

As teens begin to plan more actively for college, parents should help their teens shop around for affordable tuition and for the best financial aid packages, said Chris Greene, a spokesman for the U.S. Department of Education's Office of Federal Aid.

“It's like shopping. You want to comparison shop,” he said.

Colleges are required to provide cost estimates and calculators, but Greene said students should apply to multiple colleges to look for the best financial aid package. He also encouraged filling out the FAFSA online as soon as possible, regardless of whether parents believe they will qualify.

Ultimately, it's never too early to start saving for college — you don't need to know where a student might attend college to open a savings account. The sooner parents start talking to their children about financing college, the better, Greene said.

Savings can certainly help pay for college, but Jim Gilmoure, the associate director of student financial aid and scholarships at the University of Oregon, said it may not be possible for students to work and pay their way through college anymore. He said looking for scholarships and thoroughly researching financial aid options was essential to college success.

Oftentimes, students may qualify for more loan money than they actually need, Gilmoure said. Parents should help their students look at their expenses, and students should only borrow money when it is actually needed.

Parents should also help students identify which schools are affordable, and which are not. While working with his own kids, Gilmoure said, “in some cases, we had to say that there were some schools they were interested in that we really couldn't afford.”

When talking about loans, Nelson said, parents should educate their teens about the loan process, types of lenders, and the risks and benefits associated with borrowing money. Once in college, Gilmoure said students can run into trouble when the schools inundate them with so much information about their student loans that they fail to absorb the reality of how all these loans add up. Their main concern is getting their education, and they may think they can deal with paying off loans sometime down the road.

To make sure students absorb lessons about abstract, far-away consequences like loan repayment and interest, Nelson said parents should look for teaching opportunities that are relevant to their students. For example, a teen's desire to buy a car provides ample opportunity to talk about loans, interest, budgets and needs vs. wants, Nelson said.

When his own daughter began applying for colleges, Nelson said the family conversation focused on making wise economic decisions regarding education while they considered in- and out-of-state options and looked at scholarship possibilities.

“The big thing was those topics arose from situations that were relevant to her,” Nelson said.

If parents look for them, those opportunities will arise during high school, if not earlier.

“Underscore doing as much as possible to avoid taking out too many student loans,” Nelson said. “I can’t underscore that enough, and I think that comes from a well-rounded high school experience.”

EMAIL: epenrod@deseretnews.com