The other day we talked about college students protecting their identity at school. As a parent, there are things you can do as well to protect your good credit and possibly protecting your identity at the same time.
Often, college life means simultaneously taking care of many things, as so many things are on the plates of college students, from going to class (hopefully, at the price of tuition, none are skipped,) hanging out with friends, student activities, eating, studying for tests, and doing laundry, financial issues are the last thing on their minds.
Parents, here's some things to keep in mind:
A Credit Card... Really?
Contrary to popular belief, a student does NOT need a credit card. Most people believe a student needs a credit rating when they graduate in order to get a job.
Yes, most employers will look at credit ratings, but Doug Borkowski, director of Iowa State University Financial Counceling Center, says that employers would rather see an absence of bad credit.
More Options To Co-Signing
The Credit Card Act of 2009 prohibits card issuers from issuing a card to someone under 21 unless they prove they have the income to support the bill or have a co-signer. If you co-sign on an account, the account goes on YOUR history. This could hurt if you're thinking of planning to refinance your home or buy or lease a car because the balance is included in your debt load. Also keep in mind that the student's late or missed payment will be included in your credit report and will lower your credit score.
So, here are a few alternatives:
- Make the student an authorized signer on your card
- Help your student get a secured credit card (one that requires collateral, usually cash)
- Set up a checking account so the student can use a debit card; make sure you decline the fee-based overdraft protection
Figure Out How Much To Borrow
Most people don't take advantage of all the free money that's out there; deplete all grants and scholarships before taking out a loan. Once all free money is considered, loans should follow the following sequence:
- Federally subsidized loans
- Unsubsidized federal loans
- Private loans
Private loans should be avoided, if at all possible. Remember neither federal or private loans can be discharged in bankruptcy, but a default may not be necessary.
Use Tax Breaks
Fairly new legislation gives huge tax breaks to parents sending a child to collge; if you're not aware of them and you don't particularly care for reading the tax code, you might want to hire a professional tax preparer.
If your students is living in an aparment off campus with a bunch of buddies, make sure the lease does not leave you holding the bag. If the lease document states "joint and seveal" responsibility, then the complex can sue anyone on the lease for the entire amount, and that may just end up being YOU.
Make sure the lease limits your responsibility to only your child's share of the lease.
Lock It Up
Most students are too trusting and careless. To avoid the situation of important documents lying around, here are some things to consider:
- Keep credit and debit cards in something that locks, or in the student's pocket.
- NEVER share your credit card or PIN's with ANYONE
- Student ID numbers should not incorporate a driver's license number or a social security number
Do you know of anyone with a child in college?