Is a student loan right for your college bound kid?

Many types of student loans are available for college education. Among those Stafford loans, Perkins loans, PLUS loans, consolidated loans, institutional loans, and private loans are considered to be major sources of student loans. There are certain limitations as to who qualify for these loan programs. The Federal government is the main source of loans or loan guarantees. According to published information by the New York Federal Reserve, 43 percent of 25-year olds carry some sort of student loan debt in 2012 compared to only 25 percent in 2003. The average student loan balance in 2012 was $20,326 compared to $10,649 in 2003, 91 percent increase. They see an increasing number of student loans are becoming delinquent. Student loan balances burden future pay check of the recipient for considerable period of time which could limit other borrowings such as mortgages.

If you can save for college when your kids are younger, it can help you to avoid getting a student loan. After tax money can be invested in a 529 College Savings Plan which can be withdrawn for qualified college expenses tax free. Parents control funds and can be used for other purposes subject to Federal taxes.