Loans can be a practical.

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 urge for college at the University of Wisconsin, Madison. Although the wealth he saved was a well adapted start, it was not enough. "After about a year and a half, I was scrambling--thinking to what degree I was going to secrete my dorm expenses and tuition," he recalls. Now 36 and the director of business unfolding at Little Tornadoes, an Internet consulting firm in fresh York City, Hilmer says that pupil 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 awed curiosity many students rely on loans to help them make periods meet. Planning ahead now and understanding your options when it issues time to repay loans can help you make smart decisions about borrowing. Here are about 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 onward programs, see page 20.)

risk A LIMIT

continue in mind that evety dollar you borrow must be repaid, with interest, which can really add up above 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 revealed of your monthly income, and you're going to ne to pay your bills."

To gain some idea of how to a great degree is too much, you ne to estimate for what cause much you'll be able to pay back one time you graduate. That involves estimating your coming time salary and expenses.

Start by dint of estimating how much money you will be earning when you graduate. The Occupational watch 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, regimen clothes, car payments, and auto and apartment insurance. according to 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 scud the risk of defaulting, or failing to pay back your loan according to agreed-upon seasons These terms are specified in a promissory note, a legal document that binds you to make regular payments.

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

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

UNDERSTANDING THE TERMS

Knowing the boundarys of your loan--the conditions through which you have borrowed and are obligated to repay the money--can help you avoid default. on the contrary first you should start according to 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 extreme points meet by suspending your repayment schedule.

Deferment A period when a borrower who convenients certain criteria may temporarily stop loan payments. Depending forward your type of loan, the federal restraint may pay the interest in succession it during your deferment period. fresh borrowers might be eligible for a deferment if they are still recorded 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 the same bigger loan from a single lender which is then used to pay on the farther side the balances on the other loans. Loan consolidation can lower the monthly payments and enlarge the repayment period to a max of 30 years, if it were not that 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 contemplate at other repayment options first," advises Anna Leider, author of Don't Miss Out: The Ambitious Student's Guide To Financial Aid (Octameron, 2000)