Student loans can be a practical way to fund one’s college education. Taking out student loans can help you focus on your education instead of constantly worrying about where the next tuition bill money will come from.

When used properly, student loans can help a student with the expenses of education from undergraduate study to doctorate study.

There are a few things you’ll want to keep in mind while applying for and using student loans. Keeping these in mind will help you avoid costly mistakes that can leave you in far more debt than you need to be in.

Always fill out a FAFSA.

This is a critical step in applying for financial aid each and every year of your college experience. You can fill out the FAFSA form at the location. Doing so will help both your school and the government determine your eligibility for need based grants as well as give you access to federal student loans.

You should always fill out the FAFSA for each year. It is free and can help you get money you need for college.

Too many students and families either overlook the FAFSA or think they make too much to be eligible for aid. They end up only relying on private student loans to cover what grants, scholarships, and their own paychecks can’t cover. This leads to having more debt after graduation due to the higher fees and interest associated with private loans.

Use student loans for their intended use.

Student loans, both federal and private, should be used for your education and nothing else. You should use student loans to pay for tuition first. Any amount of tuition that isn’t paid for by grants and scholarships should be paid by student loans after any money that you or your family is using to pay for school.

You can also use your student loans to pay for room and board for your college education. Using loans for books is debatable. You can save a few thousand dollars in loans by saving up to pay for books each semester. Only use loans to cover books if you really need to.

Don’t use student loans for personal use.

Students in graduate and doctoral programs may end up using loans to help pay for rent, food, their car, health insurance, and other expenses that require large sums of money. These students generally do so because they need to focus their energy and time on their studies.

While undergraduate students surely want to stay focused on their education, many fall into the temptation of using left over student loan money to pay for things such as clothing, parties, nights out, electronics, and more.

For most students, using student loans for anything beyond tuition, room and board, and books is not advisable. If you do use student loans for things outside these areas, make sure the loan terms of use allow this.

Your best bet is to take any loan money that was refunded to you or left over and put it in a savings account until you need it. You may need extra for books or to repair your computer (both important items for your studies) and this extra money will be there for that. But if you blow it on a new pair of shoes, beer for all your friends, or an iPod you’ll likely be stuck when you need extra money for your school related bills.

Take out what you need.

When applying for private student loans, you may be able to take out a large sum at once. But consider how much you really need. After your family or own contribution is determined and you’ve factored in grants, scholarships, and federal loans, how much do you actually need?

Consider your circumstances as well. If you need your private loan to cover the rest of tuition and room and board, only take out that much. If you know you might need extra money for transportation costs to get to your internship or school related work, consider that. If you know next semester that your books will cost more, factor that in.

It can be a wise choice to take out a little extra for responsible reasons. If you run out of money midyear and need to get a job or more work hours, you are taking away from time dedicated to your studies which can hurt you in the long run.

Pay them back.

If you graduate and have a difficult time paying back your student loans, don’t ignore them. They won’t go away and not paying them can severely impact your credit which can trickle down and affect other areas of your life.

If you have trouble paying your student loans at any time, contact your lenders and explain your situation to them. Many student loan lenders are interested in making their money back with interest, some payment is better than no payment. They will likely work with you to help you extend your repayment period, defer payments, reduce payment, and so forth.

But don’t simply stop paying them. Talking with your lenders can help you work a plan out and keep your credit intact.

Consider these tips when applying for and using student loans. You’ll save money while being able to focus on your studies.

With the escalating high costs of tuition and need for more student loans, will the next generation of graduates ever be able to pay these loans off?

Graduates are so debt burdened with government loans, grants and private loans that it is going to pay a high price on the economy for many years to come. These graduates will not be able to buy homes, vehicles, take vacations or even as much as eat out. Many grads are forced to move back home after they get their graduate degree.

We encourage our young people to go to college and get that degree so they will be free to make choices in their future and to be guaranteed a good job. With the job market today there isn’t even a guarantee of that anymore. Do we really want our children to start out $100,000 to $300,000 in debt for their education?

Any graduate will tell you that it is a real strain to start paying these student loan debts on an entry level job. How does one pay a monthly loan payment of $600 to $16000 on $32000 to a $50,000 a year job? They have no options but to forgo any extra spending on a place to live and decent cars to drive.

Many private loan institutions are preying on our college students with easy loans. Many ads offer easy loans for $50,000 in minutes. Little known to the student, these have interest rates that can rise to 20%. There definitely needs to be some type of regulation on these private institutions by our federal government.

The burden of all these loan debts not only falls on the graduate but many parents of these graduates are feeling the burdens as well. The parents of these graduates may have to forgo their own retirement so they can help out their children.

Are we turning our future professionals into indentured slaves? Or do we really need to look at what is going on with our higher education institutions that is bankrupting its students? College is no longer a privilege, it is a necessity. There are not enough unskilled jobs available to put all our workers to work now.

Student loan debts are a serious crisis that we all need to be concerned with. What is going to happen when many of these student loans go into delinquency and default? We all need to find a solution for our future.

Wednesday, July 1, 2009, will be remembered as an important date for in the battle for student loan debt reform and student debt help. That’s the day on which the government’s new Income-Based Repayment Plan (IBR) became available.

Under IBR, you might be able to substantially lower your monthly student loan repayments you might even be able to cut them out entirely!

IBR covers direct federal loans and federally-guaranteed student loans made through private lenders. It does not matter, whether the loan is old or new, whether it was used for undergraduate, graduate, or job-retraining studies.

Under IBR, you could see your monthly payments capped at rates realistically adjusted downward for your income. Remaining balances would be forgiven after 25 years. Better still, those who go into relatively low-earning fields, such as public service, could enjoy student loan debt forgiveness after only 10 years.

Your income, loan size and family size help determine your monthly payments under IBR. It’s your lender who makes the decision, but you can get an idea of what’s what at www.ibrinfo.org, where you’ll find an IBR calculator.

For low-wage earners, IBR could really be a boon. People who earn $16,000 a year, for example, (or 150 percent of the poverty level) won’t have to pay more than 15 percent of their income. People who earn less won’t have to make any monthly payments at all.

But not everyone eligible will enjoy all benefits under the program.

Most people, for example, probably will have paid off their loans within 25 years, and so the loan forgiveness aspect won’t apply to them.

There is incentive to pay off the loan, too, since the accruing interest could increase the cost of the loan. The faster you pay off the loan, the less expensive it is.

The government’s Income-Contingent Repayment Plan is similar to IBR, but it’s less generous. It only applies to direct federal loans. It caps payments at 20 percent of income that surpass 100 percent of the poverty level. If you’re in the income contingent plan, you can apply to switch over to IBR.

Unfortunately, IBR cannot be applied to Parent PLUS loans, the federal loans parents take out to help pay for their children’s studies.

The cost of education is sky-rocketing, and no one can deny that. Tuition has consistently increased at rates well above that of inflation each year. Just 50 years ago when someone went to college, it might cost them about $300.00.

Now it’s costing people $40,000 to go to college, and that’s at subsidized in-state tuition rates. For more expensive programs, it’s costing upwards of $100,000! For some of these programs, there is not enough financial aid in the world to pay for. Inevitably, most college students end up with some sort of student loan. Most of the time students get federal Stafford loans to help pay for their school, and often times get private loans on top of that to pay the remaining cost.

Recently there was an article telling you that you shouldn’t ever pay off your student loans early. They had a couple of rather thought provoking reasons for this.

Their primary motivation was that in the event that you become permanently disabled or die before your student loans, you or your estate will not have to pay off your loans before you die. The article claimed that it was essentially a free disability and life insurance policy.

Is this a good reason to not pay off your student loans? The answer is no. The fact is that you are paying a lot of money for the privilege of this disability and life insurance policy. Let’s say you have $25,000 in student loans at the current federal rate of 6.8% This means that you are paying $1700 a year or $141.67 a month for a $25,000 life insurance policy. Not even term insurance is that bad! If term policies were offered for that little amount of money, you could get it for just a few dollars a month. In essence, you are paying 70 times the going rate for this term and life insurance policy!

If instead you pay off your student loans you are getting a guaranteed 7% rate of return on your money, and that’s a very good investment. Most other guaranteed investments are currently offering 4% or 5%, you are getting an addition 2% to 3% compared to any other guaranteed investments. It gets even better than that. You are not getting 7% back, you are getting 7% back per year for the life of your loan! This can often be ten or twenty years! The 7% turned into 386% after 20 years! When you pay money down on a loan, it is like you are saving the interest for the entire term of the loan!

Don’t fall for the myth that you should not pay on your student loan so that you can get some sort of interest rate on your money!