Help Your Teen Make Smarter College Money Decisions

As a parent, one of the most valuable lessons you can pass on to your teen is how to make smart financial choices. Those lessons include clearly explaining strategies your teen can use to pay for college in a way that makes sense both now and in the long run.

Savings, scholarships, and federal aid don’t always close the funding gap for many families. Private loans can help, but traditional options often come with guesswork. You’re asked to estimate how much funding your student will need for the year, and if that number changes, you (or your student, or both) may borrow too much or scramble to apply again later to cover another shortfall.

A private education line of credit from a credit union works differently.

Why a line of credit is a smarter option

A line of credit (LOC) works very much like a flexible loan or credit card, but with some key distinctions. A LOC is a preset amount of money that a financial institution agrees to lend you. It’s a form of revolving credit; you can repeatedly borrow, repay, and borrow again up to your approved limit, as long as the account is open and in good standing.

Instead of applying for a new loan every year, you submit one application. If approved, your student gains access to a line of credit they can tap into throughout college*. They only request what they need, and their school’s financial aid office certifies each request. This procedure helps prevent overborrowing and reduces the amount of interest that accumulates over time.

Key features and differences from other loans:

• Flexibility. You have access to funds when you need them, without having to reapply for a loan each time.
• No lump sum. Unlike a traditional loan, where you receive all the money upfront, an LOC allows you to withdraw only what you need when you need it.
• Competitive rates. Fixed and variable interest rates give you options to balance your interest rate and repayment term.

Borrowing what you need, when you need it, is not only a great convenience but a terrific opportunity to educate young adults about responsible borrowing.

Why choose a credit union

Credit unions offer these lines of credit with their members in mind. They are not-for-profit institutions, which means their primary focus is on service and savings rather than generating profits for shareholders. You may find that they can offer slightly lower interest rates, fewer fees, and more personalized service on products like LOCs compared to traditional banks  StudentChoice.org connects you to credit unions offering this flexible funding option. Your student borrower will have a much better chance of gaining loan approval and getting a lower interest rate by having a creditworthy co-applicant (you).

Why might your student need a co-applicant? For most high school students, building a strong credit history is difficult because they haven’t had many opportunities to borrow money and prove they can repay it responsibly. Lenders, including credit unions, look at a borrower’s creditworthiness to decide if they’ll approve the loan and what interest rate to offer.

Because their  main goal isn’t to maximize profits for shareholders, credit unions:

• Offer more competitive interest rates — they can pass savings back to their members.
• Have more flexible lending criteria — they may be more willing to work with members, even those with limited credit history, especially if there’s a strong co-applicant.
• Focus on member relationships — they often take a more personal approach than big banks, which is a benefit when discussing your financial situation and options.

Flexibility when you need it most

College costs aren’t always predictable. An education line of credit makes it easier for you and your student to adapt as those costs change. Whether your student adds a class, moves off campus, or needs a new laptop mid-year, they can tap into their credit line without having to restart the loan application process.

Credit unions designed this loan to cover the full college experience, not just one semester at a time. It’s a straightforward financial strategy to support your student while managing your family’s financial picture.

Visit StudentChoice.org to learn how an education line of credit can help you and your teen plan with more confidence.

*Subject to annual review and credit qualification. Must meet the school’s Satisfactory Academic Progress (SAP) requirements.