The NJ Department of Banking and Insurance (NJDBI) has issued a news release with financial advice for parents and students about to leave for college.
- NJDBI recommends federal loans over private tuition loans, as the interest rates usually are lower and fixed and may offer payback deferrals, income based repayment and public service loan forgiveness.
- A possible second alternative is a New Jersey College Loan to Assist State Students (NJCLAS). NJ residents may apply for these loans.
- Understand the terms of these and any loan agreement. Of special importance is any clause on deferred or extended repayment terms, which might result in a higher interest rate. Of equal importance is its affect the borrower’s credit rating, which again translates to higher interest rates.
As difficult as it is to think about something happening to a child, the last thing parents should have to deal with at a time of loss is additional debt. The NJDBI recommends life insurance for the child in the amount of the college debt.
Credit Cards & College Issued Debit Cards
Credit card companies aggressively market to college students. Although some protection is offered under federal law, caution is still required. Students who obtain credit cards should follow some basic rules.
- Maintain a small credit limit, pay off the balance each month and limit yourself to 1-2 cards.
- Be aware that cash withdrawals carry a higher interest fee.
- Obtain cards with low Annual Percentage Rate (APR) and be cautious of cards with low introductory offers.
- Find cards with low or no annual fees, which need to be paid whether or not you use the card.
- Understand the credit cards’ default interest rate.
- Read the fee schedule on College Issued Debit Cards. Using these cards may be more expensive than normal credit cards when overdrawn.
Renters, Health Care & Auto Insurance
- Students have expensive items such as laptops, TV’s and musical instruments. These items should be covered by renter’s insurance in event of damage or theft.
- College health plan coverage can be more expensive than private coverage. Under NJ law, parents may include their offspring under their own insurance until the age of 26. This may be the less expensive option.
- Auto insurance requirements are different in each state. If students are going to take their car to school, it is important to check with an insurance agent to be sure current coverage is adequate.
To read the report in its entirety, go to: http://www.state.nj.us/dobi/pressreleases/pr130620.html.