I know you didn't ask, but I want you to realize that by the time your child graduates you might have upwards of $90,000+ in loans, especially since you do not have much put aside. It will take you (or your child) 20 years of payments at $650/month to pay that off, and in the end you will end up paying $156,000. That does not include the $5500 in federal loans. It also does not take into consideration yearly cost increases in tuition/room&board/books.
It's easy to get caught up in the whole college/dorm life thing. But sometimes community college is a much better option, especially when looking at finances.
I encourage you to calculate exactly how much you and your child will be borrowing, use a loan calculator, and see what it will ultimately cost. Please.
Harsh advice, but also right on target. Before you encourage your child to take out loans of this magnitude, do consider all other options -- a closer school so dorms aren't necessary, working two jobs all summer (the student, not you) and banking every penny, going to school part time, National Guard . . . brainstorm and be creative. Though these second-string choices may not be the student's preference, they always exist.
Yes, the student really wants
this school . . . but he or she also wants other things later: An apartment, a first house, travel, a wedding, children, retirement accounts. Saying "yes" to loans now is saying "wait" or even "no" to those things later in life. 18 year olds can't see far enough down the road to realize that. Assume that college costs will increase every year. It's pretty much a sure thing.
If you do take out loans, avoid the home equity thing. No one ever thinks anything bad will happen, but good people do lose jobs, suffer accidents, and so forth -- and if you use a home equity line, they can literally take your house. Not a good risk.
Also, if you co-sign for ANYTHING for your student, take out a life insurance policy on the student. God forbid anything should happen, but IF your child were to die, YOU would owe every penny of that loan . . . and you wouldn't have the benefit of the education. Again, not a good risk. Not when life insurance for a healthy young person is very inexpensive.
If you pay late, the student's schedule will be cancelled. This could be
devestating to the goal of graduating on time, so absolutely be sure you don't miss the deadlines. We've not done loans ourselves, but one of my daughter's scholarships is VERY LATE coming through every semester, and although I worry about it, it's clear that Student Accounts doesn't care a hoot. I've called and made SURE that they've made a note that we've formally made them aware that this scholarship is "pending" so that they don't cancel her schedule. I suspect loans could be similar.
Along the same lines, it's very likely that loans will not be available in time to buy books, which will probably run into the hundreds of dollars. However, if you cannot afford to buy books, you really need to re-think the plan.
One annoying thing my daughter's school does: They add an extra $800 to your bill for school health insurance, and the only way to delete this cost is to verify your insurance with them -- and this has to be done every semester. If you don't do it by a certain date, you have to pay for their health insurance.
Assuming your child is 18, he or she must give you permission to access any and all information. This includes bills, grades, meal plan, health center records . . . anything. The system at my daughter's school is easy: Online she "gave me permission", and I got an account number /password. They also emphasize to her that she can retract permission from me anytime she pleases.
In conclusion, the first semester will be the most difficult; after that, you'll know your child's school's expectations. For the specifics about your school's billing, check the school's website, and if you still have questions, call their Student Accounts office (be ready with his or her student number and password). For example, my daughter's school is very into protecting the earth, and they do not EVER send paper bills; thus, she and I both get bills through email only, and I can pay only with a credit card (or I suppose we could drive up there and pay in cash). I pay in late July and late November.
However, every school is a little different, so don't assume that any of this will be identical at your student's school.
