How to Talk to Your Child About Student Loans

Author
Grace Lemire
Grace Lemire
author

Grace Lemire is a freelance writer and editor with over five years of experience in the personal finance industry. She has been featured on a variety of publications, including NPR, CNN, FinanceBuzz, Dollar Geek, Pangea, and True Finance. Her work focuses on the intersection of personal finance and technology. In 2023, Grace was nominated for the Best Personal Finance Advice award in Debt.com’s FinTok Awards.

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Edited by
Daniel Kahn
Daniel Kahn
editor
Daniel is the co-founder and COO at Sparrow. Daniel is responsible for the day-to-day operations of a company, working closely with other members of the executive team to develop and implement strategies to support the growth and success of the company.
Daniel was a 2023 Forbes 30 Under 30 lister in the Education category.  Daniel was born and raised in Raleigh, North Carolina and graduated from Duke University in 2020.
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Reviewed by
Camden Ford
Camden Ford
reviewer

Camden leads Sparrow’s business operations – everything from product management to business analytics. After graduating Cum Laude from Duke University where he studied Civil Engineering, Camden worked as a Consultant for A.T. Kearney where he worked in their Strategic Operations practice. With a strong background in analytics, Camden strives to deliver data-driven conclusions and insights.

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Updated
January 29, 2024

Starting the conversation about paying for college isn’t always easy, especially if you anticipate being met with one big eye-roll. While tough to navigate, it’s an important discussion to have.

If you’re not quite sure where to start, here’s a quick guide on how to have the student loan conversation with your child.

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Start the Conversation Early

It can be challenging for a teenager to conceptualize just how expensive college can be. So, it may take time for them to fully process and warm up to the idea.

If you can, start the conversation about student loans early. When your child begins to mention college is often an indicator that it’s an appropriate time to start the conversation. However, if you feel as though your child is ready earlier, lean on your own instincts. After all, you know your child best.

Make sure to ease into the topic, approaching it with empathy and understanding. While you may have gone through the college process before, it looks quite different today than it did in the past.

Cover the Important Topics

To prevent the conversation from becoming muddled with extraneous topics, create a mental list (or a physical one!) of what you want to cover. Here are a few of the most important points you may want to go over:

The Cost of College

The cost of attendance has grown rapidly, nearly 213 percent since 1988 to be exact. Knowing that wages haven’t grown at the same pace, affording college looks quite different today than it did in the past.

Allow your child to explore real data on the cost of collegeCollegeScorecard is a great place to start. Know that it may be shocking to see such large numbers, so be open to answering questions if your child has any.

The Short-Term and Long-Term Implications of The College You Choose

It’s important to acknowledge that it may be challenging for your child to comprehend just how much some institutions cost. However, there are real implications of such, both in the short-term and the long-term, that they should be aware of.

For example, attending a more expensive institution may require your child to work a part-time job while in school or attend school part-time to afford tuition. If your child isn’t willing to do so, it may be better to explore a more affordable option.

While optimism about post-graduate employment is valuable, it’s important to be realistic about it as well. Before exploring college options, encourage your child to research the expected entry-level salary for the field they intend to pursue. While attending their dream school may sound affordable, comparing their future monthly income to their monthly student loan payment may say otherwise. Getting real about what their future income may look like can help your child make more educated decisions about the financial aid options they choose to pursue —and especially the student loans they borrow.

How Much You Can Contribute

If you plan to contribute toward your child’s education, be upfront and honest about how much you’re able to provide and on what timeline. For example, if you anticipate contributing $5,000 out-of-pocket per year, given in two $2,500 chunks, let your child know. This will provide them with a better understanding of how much they’ll need to obtain in scholarships, grants, and student loans.

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Financing Options

83.8% of first-year undergraduate students receive some form of financial aid. So, it’s important that your child understands what each type of financial aid means.

Students should always accept aid in the following order: Scholarships and grants (free money) → Work-study (earned money) → Loans (borrowed money)

While some forms of aid, like student loans, can be explored close to the institution’s enrollment deadline, others will need to be pursued proactively. For example, many scholarship deadlines are well before the academic year.

Make sure your child understands the options available, so they can be proactive about submitting any necessary financial aid applications.

How Student Loans Work

A student loan will likely be the first loan your child borrows. It might even be the first line of credit they open. So, it may be challenging to understand how student loans work.

Ensure your child understands the difference between federal and private student loans. Then, break down the process of borrowing a loan and what paying it back may look like. Discuss topics such as:

  • Why interest rates matter
  • How interest may accrue while your child is in school
  • How much their monthly payment may be
    • What repayment may look like
    • What different repayment plans are available to them
    • How long it may take to repay

    This is a good time to utilize a student loan calculator to demonstrate how different loan amounts and interest rates will impact how much your child pays for their education over time.

    Make it an Ongoing Conversation

    The entire college process is overwhelming. Between campus tours, applications, taking the SAT/ACT, and paying for it, there’s a lot for your child to absorb. So, rather than squishing everything into one conversation, make it an ongoing discussion.

    There’s a good chance your child will have questions, but they might not come up all at once. Let your child know that you’re there to answer any questions they may have, at any time.

    However, know that you don’t have to have all the answers. It’s perfectly okay to say, “You know, I’m not sure what the answer to that question is. Why don’t we look into it together?” Being honest about what you do and don’t understand can create a comfortable environment where your child feels open to learning about the process with you.

    Student loan rates from our partners
    lender Ascent logo
    Ascent
    Minimum credit score
    Varies
    Fixed APR
    Fixed APR

    Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 6/3/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
    principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.

    4.29 - 15.96%
    Variable APR
    Variable APR

    Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 6/3/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
    principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.

    6.23 - 16.09%
    lender LendKey logo
    LendKey
    Minimum credit score
    660
    Fixed APR
    Fixed APR

    1 – Terms and Conditions Apply

    Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.

    2 – Cosigner Release

    Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.

    3 – Autopay Rate Reduction

    Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.

    4 – AutoPay Discount & Lowest Interest Rate

    Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.

    3.99 - 12.61%
    Variable APR
    Variable APR

    1 – Terms and Conditions Apply

    Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.

    2 – Cosigner Release

    Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.

    3 – Autopay Rate Reduction

    Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.

    4 – AutoPay Discount & Lowest Interest Rate

    Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.

    5.98 - 13.74%
    lender Earnest logo
    Earnest
    Minimum credit score
    650
    Fixed APR
    Fixed APR

    Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
    Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.54% APR to 16.74% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 17.10% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

    4.29 - 16.49%
    Variable APR
    Variable APR

    Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
    Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.54% APR to 16.74% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 17.10% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

    5.62 - 16.85%
    lender College Ave logo
    College Ave
    Minimum credit score
    Mid-600s
    Fixed APR
    Fixed APR

    College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

    *The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 08/25/2022. Variable interest rates may increase after consummation.

    This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

    This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

    Information advertised valid as of 6/14/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

    4.29 - 16.69%
    Variable APR
    Variable APR

    College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

    *The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 08/25/2022. Variable interest rates may increase after consummation.

    This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

    This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

    Information advertised valid as of 6/14/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

    5.59 - 16.85%

    Final Thoughts from the Nest

    Talking to your child about how to pay for college can be challenging to navigate –especially when it comes to the student loan side of things. However, starting the conversation early and covering a wide range of topics can help make it easier.

    When it comes time to begin the student loan process, know that Sparrow has your back. Our one-stop form allows you to compare private student loan offers from 15+ lenders at one time.

    Dive deeper in student loans