Free The Money Class by Suze Orman Page B

with you forever. See what I mean: You need to really be careful in how you borrow for school, and how much you borrow.
    Most families will qualify for some amount of need-based financial aid. You can get an estimate of what your family might qualify for here: http://bit.ly/a6VEJ . We all know that it is rare that your child will get a complete “free ride.” So your family will need to cover the portion of the bill that exceeds your aid. You can of course use your current income, as well as tapping any college savings funds, such as a 529. But it is also likely you will need to take out loans as well.
    This is how you are to approach the loan part of the college financing puzzle:
     
Student borrows first using a federal Stafford loan.
Parent considers borrowing using a federal PLUS loan.
Neither student nor parent uses a private loan
    Please follow this strategy closely. Federal loans are the only loans you should ever take out. They charge reasonable fixed interest rates, and borrowers have a few different repayment plans to choose from, including plans that will allow you to defer, delay, or reduce your payments if you lose your job or experience financial hardship.
The Risks of Private Loans for College
Private loans offered through banks typically charge a variable interest rate. The starting rate is often higher than the fixed rate on federal loans. And listen to me here: General interest rates in the coming years are likely to move higher. When that happens, the interest rate charged on private student loans will also rise. That alone is enough reason to steer clear of private loans. But there’s another reason why I want you to stay away: If you fall into financial trouble once you are in repayment, private lenders have no obligation to help you out with a different payment schedule. What is most galling is that in the event a private loan borrower dies, the debt may still be owed. With federal loans, the debt is forgiven in the event the borrower dies or becomes permanently disabled.
My opinion is that private student loans should never be used. Period. If that means your child needs to consider a less expensive school, then that is the truth your family needs to stand in, united as one.
Alert: What to Do If You Already Have a Private Loan
If you already have a private college loan or you have cosigned for someone who has taken one out, I insist that you take out a term life insurance policy that can cover 125% of the current loan amount. As I just mentioned, in the event someone with a private college loan dies, the loan may not die. It is up to the lender to decide if it will still demand repayment. By purchasing a term life insurance policy, your family—or your cosigners—could use the death benefit on the policy to repay the loan. This is an incredibly cheap way to protect your loved ones. The term policy should be for a minimum of 10 years after the student is scheduled to graduate. Given that many borrowers need even longer to repay their college loans, I would recommend you consider a 15-year or 20-year policy. I also recommend that the amount of your policy be 25% or more than what you currently expect the loan’s expected total cost to be. Why? In order to provide some insulation from rising interest rates—remember the private loan is a variable rate—and the fees that the banking industry is expert at finding reasons to charge you. So for example, let’s say you have private loans that you expect will end up costing you $50,000 to repay. I would consider a 20-year level term life insurance policy with a death benefit of $62,000 or so. For a 20-year-old male in good health that policy might cost $10 to $12 a month. That’s it. Less than $150 a year to protect your loved ones from having to finish paying off your private student loan. And purchasing term life insurance is really simple. You can learn more at the websites of term insurance specialists SelectQuote.com and AccuQuote.com .
    HOW TO