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You've prepped your child for so many of life's stages — making friends, learning how to lose gracefully, seeing something through to completion. But now that they're about to go off to college, you may want to prep them for new responsibilities.

Since paying for school may involve some of your child's future financial resources, the best way you can prep them is by including them in the college financing process.

Give Your Child an Overview of Available Financial Tools

Teaching your child about the tools that are available to help them pay for school will not only broaden their financial education, but it can also motivate them to work hard and receive scholarships.

Set up a money meeting to talk about the various types of college financial tools, including:

  • Education Investment Accounts: The 529 College Savings Plan and the Coverdell Education Savings Account are education investment accounts that grow tax-free with funds that can be withdrawn tax-free to use for qualified education expenses.
  • Grants: Grants are need-based funds that do not need to be paid back.
  • Scholarships: Scholarships are merit-based that do not need to be paid back. However, many students stop applying for scholarships after graduating from high school, but there are plenty of available scholarships for current college students.
  • Student Loans: Students can take out a loan from the federal government or from private lenders in order to help pay for college. Federal student loans can be subsidized or unsubsidized, and the financial information on your FAFSA will determine what you receive.
  • Parent Loans: Parents can take out federal loans, private loans, or even a home equity line of credit (HELOC) to help pay for their children's college.

Paying for school doesn't only include tuition and textbooks. Consider whether or not your child should apply for a credit card. This could help with their student living expenses — with the added bonus of helping them build credit. With the Key Secured Credit Card,® your child can have peace of mind that they're building credit and growing their savings.

Take Your Child through the Loan Application Process

Your child needs to know the importance of filling out the Free Application for Federal Student Aid (FAFSA) each year they attend college (by the deadline). While the FAFSA application will determine if your child is eligible for federal student loans, you'll need to fill out a separate application for private student and parent loans.

Not only is it helpful for you to fill out loan applications with them, but you can also show them what those loans mean in real life.

Prepare Your Child for Financial Responsibilities After College

It's important for your child to understand that any loans they take out under their own name will need to be paid back over a period of time after graduation. In fact, they'll want to create a budget before graduating that includes their estimated monthly loan payments.

There may be a grace period between when a child graduates and when they need to start loan repayment (six months is typical, but it varies), which can help since it could take months to find job placement.

Finally, your child should understand what interest on a loan is — a percentage charged for the remaining balance due — and that interest paid may be tax deductible. The earlier a loan is paid off, the less interest they'll pay overall.

Your child is getting closer to making the transition from living at home to becoming a college student. Remember that prepping them for this next life stage can be as simple as including them in the process as you navigate paying for school responsibilities and the paperwork that goes along with it.

All credit products are subject to credit approval.

Clients can build credit when the minimum payment is made by the due date each month.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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