The cost of attending college is expensive. It is estimated that by the year 2005, annual tuition at state colleges and universities will cost well over $25,000. That totals over $100,000 for a liberal arts bachelor degree. Scholarships and grants are becoming few and far between, and the criterion qualifies less than 5 percent of all High School seniors. For most college students, student loans are the only payment method available. Student loans can be a reasonable way to finance an education, but on the other hand, if not carefully planned, student loans can be a disaster. Obtaining the loans are easy enough, yet maintaining them are quite another story.

Most students fail to research the loans before signing on the dotted line. The first trip to the financial aid office usually results in a student filling out a generic form for state and federal funds; for which only a small percentage of students every qualify for--even those without an income, or those from low income families are rarely granted adequate student aid. Next, the student is handed, again, a generic form to apply for student loans. Here is where the big mistake is made. Never apply for any loan simply because the college or university gives you the application. You need to research all of the lending institutions for the varying interest rates. The school may give you an application for loans with interest rates between 8 and 12 %. However, if you research lenders you may find loans that have interest rates as low as 6.00 percent! It is much like applying for a credit card; the rates vary.

The loans with the best interest are Perkins loans. They have an interest rate set by the Federal government for 5 percent. They are available through your school, but are rarely mentioned unless you specifically ask for them. Make sure that you have applied for Perkins loans before going forth with the traditional student loans--Stafford Loans (formerly GSL: Guaranteed Student Loans). If you are a student of Health or Medical Sciences (HEAL), MBA (Excel) or Law (LSL), there are special loans with very low interest rates designed especially for those subject majors. However, you need to inquiry specifically about these loans, as they are rarely mentioned.

Never take our private loans or cash advances from credit cards, lines of credit, or equity loans to pay for tuition. Private loans, such as personal loans, begin to accrue interest the moment you or your school cashes the check, whereas subsidized Stafford loans do not accrue interest until 6 months after you graduate (the government pays the interest while you are in school, beware though, unsubsidized Stafford loans do accrue interests even while you are attending school). Once you graduate you have the option to consolidate all of your loans into one payment. This is part of a federal program for student loan consolidation, however you can only consolidate loans granted by approved Federal student loan lending agencies and programs; personal loans granted by your bank do not qualify.

Charging your tuition or taking a cash advance is a disaster waiting to happen. Most credit cards have APRs that vary from 14-21%. The average Stafford loan is % 8.25-9.00. That is almost 50% less. Many people make the mistake of taking out equity loans on their homes, cars and other property. Initially this sounds like a great idea, since the interest and payments are low. However, an equity loan is a secured loan. If for any reason you cannot meet the payments, the terms are often non-negotiable, and you risk losing your home or the property that you used as collateral to receive the loan. Once you graduate, it may take you several months to find a job. You don't want to risk foreclosure or repossession because you couldn't make the payments.

Before the student loan comes due--6 months after you graduate, be sure that you have arranged a pre-planned a budget. If you have $25,000 in loans, which is the average debt carried by college graduates, your payment will be between $250.00 and $300.00 a month. And note that with rising tuition costs the amount of debt carried by college graduates will most certainly double, if not, triple in the next 4 years. There are a few repayment options to choose from; graduated payment, income sensitive payment, and the standard 10-year repayment payment. Many people opt to go for the graduated payment plan because the payments start off small and then increase as your assumed income increases. However, the graduated payment "assumes" a future income--an income that you haven't even generated yet. The best way to ensure that you can afford the payment is to choose the plan with the lowest payment, and pay as much as possible over the minimum each month. There is no penalty for pre-payments or over payments. This works to your advantage because if for some reason you lose your job, or your income decreases, you are already ahead of the game due to your having overpaid. Any amount that you pay over the minimum payment is credited toward the principal of the loan, thereby making your overall interest lower!

If you should lose your job, or have an economic hardship, never ignore your loan payments. You must call SLSC (Student Loan Servicing Center) and request a deferment form for economic hardship, or unemployment. The great thing about federally subsidized student loans is that they will work with you during difficult times. Standard loan services, such as personal loan providers, will not work with you; you either have the money, or you'll be turned over to a collection agency. You cannot dismiss student loans in bankruptcy proceedings. The Federal Government means to get its money, and will go through any and all means to do so. Your wages can be garnished, and your tax returns seized. So, if you are having any difficulty in paying the loans, you must contact the loan provider to apply for a deferment. Disregarding the bills only leads to financial chaos as your interest will continue to accrue and before you know it you are in serious financial crisis.

The consumer credit consolidation companies that aid people in consolidating bills as part of a federally funded program do not assist in the matters of student loan consolidation. The only way to rearrange a payment schedule is through the student loan provider. Unanticipated financial crisis is something most students do not ever consider before they apply for student loans. To avoid financial distress you must plan ahead in order to live within your means. For many students this means going to school part-time while working a part-time job to avoid maximizing student loan amounts. If this allows you to pay off a majority of your tuition, without causing grades to suffer, do consider it.

Planning is the key to not being overburdened by student loans. By researching for the best interest rates, maximizing your Perkins loan availability, cutting expenses, and paying whatever you can--even if it is $10 a month--over the minimum, you will be able to manage the major expense of student loans.