Student loans

College is not cheap. Although there are many ways to pay for the education it
usually involves some form of loan. The best ones are from parents because the
payback time and interest rates are always much better. Since this source is
not always available, the federal government has a program that will. This is
the federal student loan program.

The most popular federal student loan program is the Sallie Mae fund. This
program arranges loan through private institutions at a much lower interest
rate than is otherwise charged. Application is usually done through the
financial aid office of the schools. The amounts lent are based upon the
applicant's financial needs as well as the fees and tuitions charged at the
educational institution.

This loan, like most grants and scholarships takes into account both the
student and his families financial liabilities. Most of the loans of this type
are paid directly to the schools. Once the school has deducted the tuition and
fees, a check is given to the student for the purchase of books and other
supplies necessary.

Other sources of loans are banks and credit unions. These are private
institutions and will base the amount of the loan upon the person's credit
rating. Some of requirements may include collateral to ensure payback. One of
the most common forms of this collateral is a second mortgage. For young
borrowers, many financial institutions will require a parent or guardian to
co-sign the loan.

The terms of most of these loans signify that payback is to start upon
graduation or after a six-month grace period from graduation. Should the
student decide to go on to an advanced degree, most loans will be again
deferred until the degree is obtained or other arrangements are made. These
requirements will vary from institution to institution.

What are student loans?

There is a myth that only the rich can afford to get a college education. This
could not be further from the truth. The sad truth is that in today's highly
technical and fast paced society, a college education is a vital necessity.
Even the simplest of tasks is becoming computerized to a point that it takes
specialized training to operate the equipment. By the time most middle and high
school children reach graduation, even a janitors position will be in need of a
two or four year degree.

When one mentions a college education the first thought is some big foreboding
university and four years of either drudgery or partying. There are, however
many new fields of study opening up that require only an Associates degree.
But, even though these are earned at community colleges, there are still
expenses to be paid. Most of the two year programs are at colleges that are
accredited. This accreditation allows students to apply for the same grants,
scholarships and loans that would be applicable to the four-year institutions.

Student loans are monies that are borrowed at a lower interest rate than
traditional loans. Many of the requirements for loans other than college
require good credit ratings and often some form of security. A student loan is
the only loan one can get that does not required the person to be gainfully
employed. The repayment period is also not started until the person completes
their education or leaves school for any other reason. There is an automatic
six-month grace period.

Depending upon the type of loan the interest may or may not accumulate from the
release of the funds. Some of the loans go directly to the college or
educational institution and others are awarded to the student directly.

Applying for a student loan

The student loan application process is not as difficult as it sounds. Although
it can be done through a bank or credit union, it is best to do it directly from
the educational institution. Once the application for admission is accepted, the
next step is at the financial aid office. The personnel know the most direct and
simplest methods of securing funds. When the aid request is sent directly from
the school, the letterhead ensures the quickest response.

Once a person has an acceptance letter, the financial aid office can offer a
list of various sources to pay for the education. Prior to entering this
office, be sure to have as much of the background paperwork with you. These
include your tax returns for the previous year as well as those of your
parents. A parent or guardians income is usually considered unless the student
is married or has been living separately for a period of time exceeding twelve
months.

Three primary factors will determine the path decided upon for securing funds.
These are; student's status, financial needs, and grade point from high school.
The student's status refers to full or part-time. The course of study also comes
into play because of special fees associated with certain scholastic paths such
as lab or equipment needs. A prospective students high school grade point will
help determine the student's eligibility for grants and scholarships. The
financial needs will consider the prospective student as well as parents and/or
spousal income as well.

For any form of financial aid, ensure enough time is allowed for a response.
Most institutions suggest at least an eight-week lead-time. The earlier one
applies, the better the chances of securing the necessary funds in time to
start class at the beginning of the semester.

How to apply for a student loan

There are many factors to consider before applying for a student loan. Among
these are how much is available in savings or other non-loan areas. Are you
going to receive any scholarships? Is the educational institution accredited?
Will you be going full time or only taking one or two classes? Make a list of
the expenses for each semester. Will you be living on campus or commuting?
Allow enough money to purchase books, food, clothing, and other basic supplies.
Once those criteria have been established, you must allow yourself plenty of
time to complete the process.

Before even considering loans or grants, you must have received an acceptance
letter from the educational institution of your choice. Once that has been
accomplished, it is best to visit the school in person and make the
acquaintance of the financial aid office. However, that is not always an
option. The second step, once an acceptance letter is received and returned is
to fill out the FAFSA or Financial Application For Student Aid. Most financial
aid offices will help in filling out this form and sending it to the correct
address. While awaiting the results from this, explore the possibilities of
various grants and scholarships that are available. Again, the financial aid
office will help determining the availabilities of these.

The FAFSA will generate a SAR or Student Aid Report. Use this form in
conjunction with grants, scholarships and other financial awards to calculate
the amount of money that will need to be borrowed to ensure payment of the
educational credits. If you are planning on working while attending school,
these funds can be used to offset the total repayment amounts. However, the
lending institutions will use these monies to determine the loan amounts
available for subsequent semesters.

Other types of student loans

Not all loans for college are obvious. There are two sources for financial aid
that are often overlooked. Each of these will be discussed in more detail
below. Parents tend to plan their children's future well before the child is
even born. Although mom and dad just know their child will be a genius and will
be offered full scholarships, they also try to be ready just in case that isn't
quite the case. To that end, many parents will have life insurance and annuity
plans in place that will mature in time for their offspring to take advantage
of the financial rewards.

By taking out a permanent life insurance plan, it can be paid for in a certain
number of years. This type of insurance can then be cashed in and the payout
can be applied to the child's educational needs. Parents will also cash in this
type of policy and invest it in an interest bearing account thus allowing for a
growth fund that will grow as the child ages. As with retirement funds below,
some companies allow loans against the face value of the policies that can then
be applied to educational expenses.

One or both parents may also set up a retirement fund, such as a 401k. After a
period of years, these monies can be taken out, pre-tax and applied to a
child's education. Some company retirement funds allow the employee to just
borrow against the fund for educational purposes. For tax purposes the Roth
plan is also a possibility. To get a clearer picture of how either of these is
best used, one should consult a tax professional. By knowing ahead of time the
ultimate purpose of this plan, the professional can help direct the individual
into setting up the proper deductions.

Scholarship Scams

In today's mass-market media world, everybody is trying to get something for
nothing. One very old saying says to never look a gift horse in the mouth. This
is as true today as it was when it was first coined. Whenever something is
offered for free, there is almost always a catch to it. Granted there are many
free grants and scholarships available, but if something doesn't look quite
right, investigate thoroughly before signing on the dotted line. Some of the
things to look for include hidden fees and up-front monies to be paid.

Among the junk mail are letters that look legitimate but are in fact a scheme
to con a person into paying for something that is nothing more than a scam.
Some of these are obvious uses of a legitimate fund name but with one or two
letters changed. By reading the text of the letter and the fine print it is
usually easy to spot the phony offers. However, if there are any questions,
have the school financial aid officers look it over. There is a book published
each year listing available scholarships.

Students with less than stellar academic records are easy targets. Offers that
state things such as 'First come, first served' are never true. This kind of
deadline may be true for furniture sales, but never true for scholarships.
Another favorite line is "You've won!" If you have not applied for this
scholarship, you cannot just win it. A scholarship must be applied for. These
two types of scams almost invariably ask for credit card information for
verification, or a bank account number to hold the winnings. This is never
asked for with legitimate scholarship grants. One other catch phrase to watch
for is "It's guaranteed". A scholarship search cannot guarantee getting a
person scholarship money.

Scholarships an alternative to student loans

A scholarship is money given to pay or offset school expenses and lower the
number of student loans you need. The amounts can range from only a few dollars
to an all expenses type. This latter one is often referred to as a full ride.
The counseling offices of most high schools will have a book that lists the
more common scholarships available. Below are descriptions of some of the most
often used sources.

Many companies offer scholarships through the local school systems. This is a
way for a company to encourage students to study subjects applicable to that
companies business. Some of these scholarships are free but others have a
stipulation of working for that particular business upon successful completion
of studies. This is a type of student loan, as you need to repay it by working
off the debt.

Minority groups encourage members of that particular minority by offering money
for education. Other groups specify that it is designed for women or of a
particular faith. Scholarships of this nature usually do not define the subject
matter to be studied.

Local universities often court outstanding athletes by having their abilities
tied to the scholarship. These students receive the money but are expected to
also use their athletic talents at the school offering the award. This is also
a type of student loan, with the payment being performance in the sport. .

Most of the scholarships discussed here are offered at the high school level.
Talent scouts notice good athletes and companies and minority groups maintain
close ties to many schools. This community involvement helps to ensure a vital
workforce and top-notch sports teams. Keep in mind that, while actual money may
not be needed in return, many of these are student loans requiring payment in
some form.

Pell Grants

There are ways you can lessen the amount of student loans you need. Once you
are accepted at an accredited university, college, or community college, talk
to the financial aid department. There are several scholarships and grants that
are based on income and may make it possible not to need as high a student loan.

The Pell grant is one of the federal programs most schools automatically file
for students. The maximum award is over four thousand dollars. However, not all
students will get the maximum amount. Many factors are considered when a student
applies. With few exceptions, a part time student must be carrying at least a
half time load. Another factor that is considered is the actual college costs
for both tuition and books.

Unlike a student loan, a Pell grant is just that, a grant. It is never repaid.
It is up to the individual institution as to how the money is applied. You may
either receive a check or have it applied directly to your school expenses. The
various options will be discussed between the student and financial aid officer.
Federal law required payments to be made a minimum of twice per academic year.

Another issue to consider when applying for a Pell grant is the type of
institution. State colleges and universities are often less expensive than
private colleges. Pell grants are available to Universities, private colleges
and community colleges. The community college system is often the least
expensive and can be used to earn Associate degrees and have many of the
credits then be applied to a four-year institution. By using the Pell grant to
pay many of these expenses the student can thus earn a degree that can be used
to secure employment that can then be applied to the continuing education
process.

Stafford loans

One of the primary sources for student loans is the federal government. These
are called Stafford loans. There are two types, direct and FFEL. These differ
in a number of respects and have the same eligibility requirements. The major
differences are how the loans are repaid and the needs.

The direct student loan program receives its funds from the federal government.
The FFEL uses private lenders such as banks and credit unions for funding. Not
all private lenders participate in the FFEL program. The repayment options also
depend upon which institution is used and their particular requirements. There
are two types of loans, subsidized, and unsubsidized.

A subsidized loan is based on financial need. The federal government subsidizes
the interest on these loans. This interest does not get applied during the
period prior to repayment or during authorized repayment periods.

An unsubsidized loan is available to almost anyone. These loans have the
interest start to accrue from the moment the loan is authorized until the loan
is paid in full. In addition these loans can be capitalized. This means that
the interest will be added to the principle and the interest will then be
applied to this higher amount. To keep this at a minimum, it is suggested that
at least the interest be paid as it accumulates.

The amount of money available is dependent upon whether you are a full time or
half time student. No Stafford loans are available to students who are enrolled
for less than one third of an academic year. Your financial aid department will
assist in determining the amount of money available. Both the direct and FFEL
loans are in addition to other monetary sources such as grants and
scholarships. Because these are interest-accumulating loans it is best to
consider any available grants, gifts or scholarships first and then base the
loan upon the remaining balance.

FAFSA

FAFSA is Free Application For Student Aid. This is the first step in all
applications for establishing a person's eligibility for federal or private
loans. Federal loans are called Stafford loans and will be covered separately.
There is a minimum eight-week turn around time so application must be made
early. This procedure must be completed online at HYPERLINK
"http://www.fafsa.ed.gov" www.fafsa.ed.gov. Once this has been completed it
will generate a form called the SAR or Student Aid Report.

If you do not include an email address on your FAFSA application the SAR report
will be sent to the postal address indicated. Some institutions, such as foreign
country institutions require the full eight-page SAR and this must be sent to a
postal address. Once the SAR has been received, the student is then free to
select the financial institution to secure the loan.

To ensure a person understands the entire process of filling out a FAFSA, a
trip to the library may be in order. Check with the librarian for directions to
start the search. By doing the research up front many of the more common
pitfalls can be avoided. As you work through the search process, you may likely
discover sources heretofore-unknown companies and businesses that offer student
loans. Some of the larger libraries may even have a computer section where you
can file the FAFSA application.

The FAFSA process will also list the state resources and funds available. Often
these sources are overlooked. There are state student loan agencies that are
available but too often the prospective student doesn't even know they exist.
By using the FAFSA process, all available resources are thus listed. Because
this is a lengthy process and the loan application is also at times lengthy,
one should start as early as possible to ensure compliance in time for classes
to begin.

Reducing the Amount You Need for a Student Loan

While you may not be able avoid taking out a loan for college, here are six
tips to help minimize the cost of your college education.

* Choose an affordable school. Quality of education is not directly related to
the cost of education. State schools are partially funded by the government, so
they are often less expensive.

* Most state schools offer greatly reduced rates for residents. Depending on
what is required to establish residency, it might be work moving before
starting college in order to get the less expensive tuition.

* Take a summer job. If you can find a job that is related to your area of
study, it will not only help you financially, but help make you a better
student as well.

* Look for scholarships. Many scholarship programs have been cut back in recent
years, but there is still money available. Check with your financial aid
department. Also check with your professors. They often know of scholarships
that are handled on a departmental level instead of through financial aid.

* Try to get a job tutoring. Work study usually isn't at a very high pay rate,
but getting paid to teach your favorite subject will often make you a better
student while giving you some extra money for expenses.

* Consider the total cost. Don't just look at the cost of tuition when
evaluating a school. Keep in mind other factors. If a nearby school would
enable you to live at home, it might be much less expensive than a distant
school with cheaper tuition.

* Consolidate college debt. Once you've graduated look for programs that will
let you consolidate any debt that you have at a low interest rate. This will
allow you to put more money toward the principle and pay it off quickly

Staying Out of Trouble With Student Loans

Once you graduate and find a job, the reality of paying back your student loans
hits. Below are some steps you can take to help keep the payments from causing
you heartache.

The first rule is to stick to a payment plan. Set aside a certain amount every
month for your loan payment. Making a larger payment than required each month
can help you pay back the loan sooner, thereby saving you a great deal of money
on interest. If you think you may "forget", set it so the payment is
electronically transferred each month.

Though interest rates of student loans are low compared to credit cards and
other loans, it's still a frustrating reality to deal with. But there is hope,
if you're making under $65,000 on your own or less than $130,000 if filing
jointly you can deduct up to $2,500 of the yearly interest you're paying on
your student loan.

If you're simply can't come up with your monthly payment, there are options.
Since your salary is only going to grow as you climb the corporate ladder, you
can schedule graduated repayment plans with your lender. You start with a low
monthly payment that will gradually get larger over the term of your loan.

If you're absolutely out of options, you might be able to temporarily suspend
your payments. If you lose your job or go back to school for an advanced
degree, you can request a deferment of your loan payments. If your request is
granted and you have a Stafford loan, the government will actually take care of
the interest that accrues during your deferment.

If you can't get a deferment, try forbearance. You can suspend payments for up
to a year, though you'll still be responsible for the built up interest.

Student Loans for Graduate Students

For those who want to continue their education into the post-graduate level,
there are still loan options available. The biggest ones are the same as
undergraduate loans, the Perkins and Stafford Loans. Another resource is to
look to private organizations for graduate loans. Below is a brief summary of
the loans available to graduate students.

GOVERNMENT GRADUATE LOANS

Government graduate loans differ from undergraduate loans really in name only.
So just like undergraduates, graduates have the opportunity to get a Perkins or
Stafford loan from the government.

1) Perkins Graduate loan

A Perkins graduate loan is available to students who demonstrate financial
hardship. It has an interest rate of only 5 percent and can finance up to
$4,000 of the graduate student's education. For graduate students who are
adversely limited economically, the Perkins loan is one of the best options.

2) Stafford Graduate Loan

Stafford graduate loans are available to any graduate student regardless of
their financial situation. Two types of Stafford graduate loans exist:
subsidized and unsubsidized. The difference between the two types lies in who
pays the interest. For subsidized Stafford graduate loans, the government pays
the interest. Students pay for the interest in unsubsidized Stafford graduate
loans, though there is the option of not having to make payments until after
graduation.

To apply for either the Perkins or Stafford graduate loans, one must submit a
FAFSA form to the government. When the form has been processed the government
will send a SAR (Student Aide Report). This will give further instructions on
how to apply for these loans.

ALTERNATIVE GRADUATE LOANS

Alternative graduate loans, also known as private graduate loans, are loans
funded by non-governmental entities. Companies offering these loans could be
banks, credit card agencies or any other enterprise interested in helping
graduate students secure student loans.

Department of Education Direct Student Loans

There is a little known option available to students who need financial
assistance. This is a direct loan available from the Department of Education.

You can obtain an application by either calling the Department of Education or
going online. Doing a Google search will bring you to their website. From
there, you can get all the information you need to apply.

You can apply for two different types of direct loans -- subsidized and
unsubsidized.

A subsidized direct loan means that the amount of credit you receive is based
on the tuition you need.

As long as you are in school, you will not be required to make a payment and
you will not be charged interest. This is the best option.

An unsubsidized direct loan means that there is a limit to the amount of money
you can borrow. With an unsubsidized loan, the amount that you require is not
taken into consideration.

There is considerable interest charged to both these types of credits that you
will be responsible for paying.

Loan Amount Restrictions

The maximum amount for a subsidized loan varies depends on what year you are in
college. An undergraduate can receive a maximum of $2,625, and the maximum you
can receive on an unsubsidized loan is $4,000.

For the second year of college the maximum increases to $3,500 for a subsidized
direct loan and $5,000 for an unsubsidized loan. For the remaining years that
you are in college, a subsidized loan remains at $5,500. The limit for an
unsubsidized direct loan does not increase for the remaining years.

If you are a Graduate or professional student, the maximum you can borrow on a
subsidized loan is $8,500 per academic year. Graduate and professional students
who apply for an unsubsidized direct loan can borrow up to $10,000 per year.

Private Student Loans

Federal student loans are based on both income and availability. What happens
if you can't afford college yet don't qualify? An alternative choice for you or
your parents is a private student loan. These are loans done through private
lenders instead of the government. The advantage of these types of direct
student loans is that they have many of the same kinds of benefits as federal
loans.

These loans can be used for any and all college expenses. Things like tuition,
books, supplies, computers, and living expenses are all things that qualify for
private student loan funds. These loans are unsecured, meaning that no
collateral is needed. The loans are credit-based instead. This can mean that
you might need a co-signer if you have not established a credit history.

A private education loan is usually a low-interest loan. The money can be
delivered in as little as five days, and the money is given to you instead of
the school. You are then responsible for paying for their various educational
expenses.

This kind of loan has other advantages similar to federal loans. The interest
and principal payments can be deferred until you graduate from school. For most
of these loans, you are required to be attending school at least halftime for
the deferral of payments and interest.

When you do graduate, the loans can usually be deferred for six months until
you finds employment, and then you will generally have a variety of repayment
options available so that you can tailor your payments to your income.

Don't let the high cost of a college education deter you. There are options
available even for those who do not meet low income standards required by
federal programs. Take time to do some research and you will soon be on your
way.

How Not to Pay Back Your Student Loan

Is there ever a chance you will not have to pay back your student loans? The
answer is: YES! Depending on the type of student loan you have and when you
obtained it, you may be able to cancel all or a portion of your loan under one
of the following circumstances:

* The former student for whom the loan was taken has died. 

* You become totally and permanently disabled. 

* Your school closed before you could complete your program of study. 

* Your school falsely certified that you were eligible for a student loan. 

* You left school and were entitled to a refund but never received the money. 

* You teach in a Department of Education-approved school serving low-income 
  students or in designated teacher shortage areas (other types of teacher 
  cancellations are available for Perkins loans). 

* You serve in the U.S. military (partial cancellation for Perkins loans 
  only). 

* You're a full-time employee of a public or nonprofit agency providing 
  services to low-income, high-risk children and their families (Perkins 
  loans only). 

* You're a full-time nurse or medical technician (Perkins loans only). 

* You're a full-time law enforcement or corrections officer (Perkins loans 
  only). 

* You're a full-time staff member in a Head Start program (Perkins loans only). 

* You are a Peace Corps or VISTA volunteer (Perkins loans only).

These circumstances apply mainly to federally funded student loans. Other
lenders, however, may extend the same courtesy to you if you discuss it with
them. They are not required to do so, but asking does not hurt.

Keep in mind that should the circumstances above change, you will most likely
be asked to repay your loan. Find out beforehand what the exact conditions of
the loan forgiveness entails. Doing so will help lessen any surptises in the
future.

No Credit, Bad Credit, No Problem

Even if you have little credit or no credit rating at all, you can still get a
student loan. Student loans are a good way to build credit as well, so once you
obtain one, be sure to repay it.

Wonderful student loans for those with little or no credit are government-backed 
loans or loans offered through your university. One such option is the Stafford 
loan. When the student borrows these loans, most lenders do not look at the 
student's credit history. You can apply for a Perkins loan as well, which also 
does not look at your credit history. The government supplies the money for this 
type of loan, but it is reserved those who are most in need, so this option is 
not available for everyone.

Because Perkins and Stafford student loans are often limited to a particular
amount each year and in total, there are also government-backed student loans
for parents of students, called PLUS loans. Because these are government-backed
loans, lenders -- whether a financial institution or the government itself -- do
not look at anyone's credit score. These lenders do, however, take a look at
your credit history to decide if you are late on any payments or in default. If
so, you will not be able to receive a loan.

One thing to remember with government-backed loans is that, though you can
defer payments and you may have very low interest rates, you must re-pay your
loans. The government cannot only hire a bill collector, but they can
confiscate your federal tax refunds or even deduct the payments from your
wages. Also, if you declare bankruptcy, more often than not, your student loans
will not be forgiven. If you have bad credit or no credit, student loans can be
a good option for you.

Federal Student Loans Vs. Parent Loans

Federal student loans have the lowest interest rates and the best repayment
options. If you need to apply for a loan and you can qualify for federal loans
then make this the top choice. As a way of limiting your loan responsibilities,
only get the funds that you will need and refuse any other offers to raise it.
Parents can opt to help their children pay off the loans after graduation.

Federal parent loans or PLUS loans (Parent Loan for Undergraduate Students) can
be considered as another option in getting a loan that offers lower interest
rates. Parents that have dependent children who are going to start their
university education and have a good credit history can apply for the PLUS
loan. PLUS loans are not needs based so you can draw up a loan up to the total
cost of your undergraduate education expenses with the other financial aids
that you have received deducted from the actual total. One peculiar
characteristic of a PLUS loan though is that the first payment for the loan
starts about 60 days after the loan is granted. This is different from a
student loan where the first loan payment is deferred until after graduation.
PLUS loans also require an application fee.

The big decision to be made is to determine which kind of loan will be the best
option for the individual. When deciding on which loan to get you should first
determine the amount of debt that your child will need in order to graduate
from his studies. You should also ask yourself the level of responsibility you
want your child to assume in paying off the loan. Finally you should sit down
with your child and try to work out a repayment plan in paying for the loan.

Why Consolidate Your Student Loans?

Once you have graduated from a college or university, you need to start
thinking about the loans you needed to get through these years. They must be
paid back in a timely manner in order to keep a good credit rating for such
times when you may need another loan to purchase a home or car.

For some students who have a few student loans to repay concurrently, it can be
a financial drain on their family finances. That is where student loan 
consolidation comes in.

Student loan consolidation basically consolidates all your student loans into
one loan so that it is easier to manage and make payments. When you are getting
a student loan consolidation whether from the government or the private market,
your existing student loans are paid for and erased by the student loan
consolidation lender. The balances are transferred to the new student loan
consolidation. Thus you start a new loan and only needs to make a single
payment each month.

There are many advantages to using student loan consolidation. The interest
rates will be lower since it takes the average interest rates of your previous
student loans. Thus due to government legislation, the maximum interest rate
cannot be higher than 8.25 percent.

It becomes a lot easier to manage a single student loan and payment is easier.
The repayment options are quite flexible. For federal student loan
consolidation, you can opt to start repaying after you have graduated from
school. There are also several other options.

Another beneficial side effect of student loan consolidation is that it can
also improve your credit score. Since you are effectively clearing all your old
student loans and taking a new one, your credit score will increase and this is
important if plan to take other types of loans in the future.

The Four Federal Student Loan Consolidation Plans

Anybody studying in the United States and owing a student loan is eligible for
federal student loan consolidation plans.

Federal student loan consolidation plans are applicable for all students
whether you are still in school or a recent graduate or already into your new
career.

If you currently have several student loans, it is easier if you use federal
student loan consolidation to consolidate them into one loan payment thus
making it easier to manage.

There are four kinds of federal student loan consolidation to choose from:

* Standard Student Loan Consolidation

The maximum student loan period is 10 years and the payment amount per month is
fixed. This type of plan is suitable for students who can afford to pay a fixed
amount per month. The interest rate would not be a big factor in huge student
consolidation loans. This is easiest for those on a budget.

* Extended Payment Plan

This type of plan is similar to standard student loan consolidation except it
has a longer repayment period of between 15 to 30 years. The repayment period
is dependent on the student loan amount.

* Graduated Payment Plan

This type of plan is suitable for students still schooling and can only repay
the student loan when they have a job after they graduated. The payment period
is between 15 to 30 years. The payment amount per month starts low and
increases steadily every two years.

* Income Contingent Payment Plan

This type of plan is complicated and is based on the student's income level
over a period of years. It is also based on the family's annual gross income,
other loan amounts owed, other assets, mortgages etc.

Most student usually choose graduated payment plan or the extended payment plan
for their federal student loan consolidation

Options for Paying Your Student Loan

There are mainly four options for paying back your student loan. If you land up
with a good job once out of college, and can afford to make steep monthly
payments, go with the standard payment schedule. Under this option, you can pay
off your debt within 10 years with the best interest rate. It's the quickest way
to pay off your loans. However, it requires high monthly payments.

Graduated payment is an option if you expect to make a modest but steadily
increasing wage. The payment requirements will start off gentle, and will
gradually increase every couple of years for the next 10 to 30 years.

If you're in a commission-based or seasonal business, your income will vary
accordingly. In this case, your monthly payment bill will be proportional to
the amount you are currently making. You get a levy of get up to 15 years to
pay it all off your student loan.

With a long-term payment option you'll be allowed to pay the least possible
amount per month for 10 to 30 years. That however means that in 30 years you
may have paid double the original amount of your loan. You have the flexibility
of choosing to switch from one payment option to another, depending on your
financial status..

Student loan consolidation is another well-trodden path chosen by graduates
each year. It allows you to put together your separate student loans into one
big loan. Debt consolidation will bundle your student loans into one, with a
single loan amount which will be much lesser than paying multiple loans. Some
also choose consolidation because it's easier to keep track of the bill.

Banks want their money and will often work with you to find the payment method
that is easiest for you to keep paying. The bank gets their money and you can
live within your budget.

Consolidating Your Student Loans

Student loans are just as burdensome as any other loan and in some cases
students have several loans taken out in order to pay for college. This is
where student loan debt consolidation comes in with a plan of consolidating all
of an individual's student loans into one manageable loan. You need to get your
facts by researching various places before you apply for one of these
consolidation loans. Only certain types of loans can be consolidated under this
type of loan and you will need to check. You cannot include loans such as credit
cards, loans from family members, or automobile loans in the student loan
consolidation.

The obvious benefits to consolidating a student loan are that there will be a
single payment, probably a lower payment, and one fixed interest rate. The
fixed interest rate is especially attractive because this helps a person set up
a budget easier. Of course the drawback to a fixed interest rate in this type of
loan is that you may not be able to take advantage of future drops in interest
rates if they occur.

Another drawback to student loan debt consolidation is the length of the term.
It could be that you end up paying this loan longer than you would have
otherwise and in the end pay more total interest. So be careful to get all of
the data about your student loan debt consolidation loan before you sign the
agreement..

Finally, you need to determine if consolidation is really for you before doing
it. It may be that you want to pay off the loan faster as student debt
consolidation loans tend to stretch out longer. But for most it is an
attractive way to get your payments down and manage your student loan debt

Help, I Can't Pay Back My Student Loan!

What happens if you find yourself unable to pay back your student loan? Rather
than ignore the payments, try contacting the student loan officer at your bank
and ask about a deferment. A deferment will allow you to put off paying in any
of the following circumstances:

1. Pregnant or Caring For a Newborn -- If you are not working, no longer in
school, and have attended school within the last 6 months for at least
halt-time, you may qualify for the parental leave student loan deferment. You
will be asked to provide proof in the form of documentation regarding your
current situation. If you are caring for an adoptive child, you'll need to get
a statement from the adoption agency referencing the adopted child's placement.
Certification from your school concerning your enrollment status over the
previous 6 months may also be required

2. Economic Hardship -- The way this works is in you need to have income below
the low standard of living as determined by the U.S. Bureau of Statistics. Keep
in mind you may need to provide proof in this situation, similar to the parental
loan deferment.

3. In-school Deferment -- As long as you are enrolled at least half-time no
interest accrues and no payments are required until after a six-month grace
period after you ceases to be enrolled at least half-time.

4. Disability -- In the unfortunate case that you
may become disabled and unable to work for more than 60 days, or you need to
care for a disabled spouse or dependent for more than 90 days, then you may be
eligible for deferment.

5. Unemployment -- You'll need to be working less than 30 hours per week and
you must prove your case in order to qualify for a deferment.

Paying Off Defaulted Student Loans

If you have not made your federal Stafford, PLUS or Graduate PLUS loan payment
in over 270 days, your student loan will be considered in default. What can you
do about this to keep your credit from being ruined?

Having a defaulted Stafford, PLUS or Graduate PLUS loan on your credit report
will cost you dearly in the long run. The bad mark will mean higher interest
rates and credit denials until it is cleared, a minimum of 7 years. Even if you
pay the loan in full it will still be marked as defaulted. There is only one way
out of this predicament - loan rehabilitation.

Contact your lender and make arrangements to pay back your student loan and you
are on your way to a clean credit report. Your lender wants to get paid, and
they know the best way for that to happen is to work with you to come up with a
payment you can afford. When you reach a satisfactory repayment agreement with
your lender stick to it!

After nine full payments on your defaulted Stafford, PLUS or Graduate PLUS loan
made within twenty days of their due dates (twelve full payments for Perkins
loans) your loan will be taken out of default status and your credit record
will be clean. These must be voluntary payments. Garnishment or other forced
payments do not count. As soon as your default status is cleared you will be
free to consolidate your loans and lower your payments even more.

While you may be able to consolidate after three consecutive payments your loan
will not be taken out of default status. This will be marked on your credit
record as "defaulted, paid in full" and still considered a black mark so loan
rehabilitation before consolidation is mandatory for a clean credit history

Saving Money on Your Student Loan

Anyone that has gone through college knows it cost a lot, which leads to many
take out student loans. Just as with any type of loan, it is important that you
do your research to find the best student loans for your situation. Different
loans will get you different amounts of money with various circumstances behind
the loan. However, there are a few things you can do with any student loan to
save money.

With student loans, the interest rate is adjusted every July 1st making it
difficult to know how much you really are going to have to owe when getting out
of college. There is, however, a way to lock your interest rates to avoid having
them raised after a certain period of time. By consolidating your interest rates
you can have them permanently locked for the remainder of your studies.

The next thing to look at to help you save money on your student loans is
automatic payment. A lot of lenders will offer you incentives and reduced
interest rates when you have your student loan payments automatically deducted
from your account. The reason being is that you are guaranteeing the lender
that you will be paying the loan on time and in full amount by giving them
access to your account. This also makes it more convenient for you allowing you
to avoid missing a payment.

The most obvious way to save money with your loan is to be on time. The minute
you are late with your payment the interest rates will go up and your credit
will go down. If you do feel the pressure of making the payments on time, make
sure to talk to the lender before getting too far behind to see if you can work
out an arrangement of some sort.

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