Loans can be a practical, low-cost ...

Loans can be a practical, low-cost way to pay for college-just be prepared to make payments far into the future

Waiting tables and working summer for a surveying firm gave David Hilmer a nice nest harass for college at the University of Wisconsin, Madison. Although the standard of value he saved was a beneficial start, it was not enough. "After about a year and a half, I was scrambling--thinking by what means I was going to mask my dorm expenses and tuition," he recalls. Now 36 and the director of business growth at Little Tornadoes, an Internet consulting firm in just discovered York City, Hilmer says that scholar loans (a federal Perkins, Stafford, and a university loan) enabled him to graduate.

With the high require to be paid [i]or[/i] undergone of a college education today, it is no miracle many students rely on loans to help them make completions meet. Planning ahead now and understanding your options when it follows time to repay loans can help you make smart decisions about borrowing. Here are near simple guidelines that apply to the major federal loan programs--the Perkins, the Stafford, the PLUS--as well as independent bank loans. (For more specifics forward programs, see page 20.)

appoint A LIMIT

hold in mind that evety dollar you borrow must be repaid, with interest, which can really add up athwart a 10-year (or longer) repayment term

"It's easy to think a $200-a-month payment is not a big deal," says Hilmer, "but those payments can take a big chunk without of your monthly income, and you're going to ne to pay your bills."

To memorize some idea of how earnestly is too much, you ne to estimate for what reason much you'll be able to pay back formerly you graduate. That involves estimating your subsequent time salary and expenses.

Start by dint of estimating how much money you will be earning when you graduate. The Occupational foresight Handbook published by the U Department of Labor (available online at wwwblsgov/ocohomehtm) gives salary ranges for many careers. Then you ne to estimate monthly expenses--rent utilities, forage clothes, car payments, and auto and apartment insurance. on subtracting your estimated expenses from your estimated salary, you can predict in what manner much you can afford in monthly loan payments.

AVOID DEFAULT AT ALL COSTS

If you do wind up borrowing more than you can afford, you stream the risk of defaulting, or failing to pay back your loan according to agreed-upon times These terms are specified in a promissory note, a legal document that binds you to make regular payments.

Default usually conclusions after you miss payments for 180 days. Many defaulted loans are sent to collection agencies that may charge you splendid late fees, take money from your wages, and add in succession collection costs. Worst of all, a defaulted loan can haunt you in the futurity because it will be recorded as part of your credit history for seven years. Lender commit to your credit history when you apply for any major loan. If they behold a defaulted loan on your record, they may disown you a mortgage, car loan, credit card, or personal loan.

principally lenders provide students with charts to help track repayments--or you can use our handy "15-Minute Loan Manager" in succession the previous page. Keep in mind: If you can't make a monthly installment, immediately contact your lender or servicer (the company that avows your loan) to discuss the problem

UNDERSTANDING THE TERMS

Knowing the word s of your loan--the conditions according to which you have borrowed and are obligated to repay the money--can help you avoid default. yet first you should start by way of understanding some basic loan terms:

Grace period. A period of time--usually lasting six month after you leave college--when many scholar loans don't require repayment. After the grace period, a deferment or forbearance may help you make conclusions meet by suspending your repayment schedule.

Deferment A period when a borrower who fits certain criteria may temporarily stop loan payments. Depending in succession your type of loan, the federal rule may pay the interest in succession it during your deferment period. recently made known borrowers might be eligible for a deferment if they are still enlisted in school halftime or full-time; unemployed; studying in an approved graduate fellowship or rehabilitation program for the disabled; or experiencing economic hardship.

Forbearance. The temporary adjustment to your loan repayment schedule in cases of financial hardship. Anyone with scholar loans may be in forbearance for six month at a time, for up to a total of three years. Since interest accrues during forbearance, it will be added to the balance of your loan.

Loan consolidation. Combining several loans into individual bigger loan from a single lender which is then used to pay against the balances on the other loans. Loan consolidation can lower the monthly payments and prolong the repayment period to a max of 30 years, on the other hand you'll pay more interest. "[Loan consolidation] really increases the total amount you'll pay through the whole extent of the life of the loan. You should apply the mind at other repayment options first," advises Anna Leider, author of Don't Miss Out: The Ambitious Student's Guide To Financial Aid (Octameron, 2000)