But like most people I know, that’s about the extent of the time and energy I’ve invested in understanding my student loans and student loan debt.

The fact is, we’re borrowing more and more to go to school. The Wall Street Journal reports that the amount of money students borrow has long been on the rise:

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion…Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate…

With the cost of higher education soaring and the pressures our society places to become as educated as possible, this number will surely continue to grow. That’s a problem, but I’ll leave the debate about how much is too much student loan debt for another time.

The fact is many of us have student loan debt. And how we tackle that debt is one of the first big financial decisions we make once we’re on our own.

1. Understand the Difference Between Private, Subsidized, and Unsubsidized Loans

Student loans come in a variety of “flavors”. Federally-guaranteed student loans are backed by the U.S. Government and, as a result, have low interest rates and are available to most students regardless of credit history. The most common federal loan programs are Stafford loans, Perkins loans, and PLUS loans (for parents).

• Subsidized federal student loans are available to students meeting income requirements and do not charge income while you are still in school or during grace periods.
• Unsubsidized federal loans are available to more borrowers but charge interest as soon as they are disbursed.
• Private student loans are not federally-guaranteed, require good credit, have higher interest rates, and charge interest as soon as they are disbursed.

2. Grace Periods and Deferment

Federal Stafford loans have a six month grace period; Perkins loans have a nine month grace period. That means you aren’t required to start paying them back until six or nine months after you graduate or cease being a full-time student. If your loans are subsidized, you won’t pay any interest on the balance during that time. If the loans are unsubsidized, however, interest will accrue, so it’s a good idea to make payments anyway.

If you are having trouble finding a job or are not working, you may be able to contact your student lender and defer your loan. Just remember that if you have an unsubsidized loan, interest will be accumulating.

3. Student Loans Must Be Paid!

The consequences for defaulting on a federal student loans are more severe than failing to repay other debts (e.g., a credit card). If you fail to repay a student loan, not only will you ruin your credit, the government can seize your federal tax refund, garnish your wages, sue you, and cut off federal benefits like social security. Finally, federal student loans cannot be discharged in bankruptcy; so even if you hit rock bottom, you will still have to pay up for your education!

4. Student Loan Interest is Tax Deductible

On a more positive not, if you earn less than $70,000 a year, you can deduct up to $2,500 of student loan interest on your federal tax return, even if you don’t itemize your deductions. Each year, you should receive form 1098-E from your student loan lenders, detailing how much interest you paid (and can deduct).

5. Student Loans May be Forgiven

If you enter a career that serves the public in high-need areas (such as teaching or delivering healthcare in rural, low-income regions), you may qualify for programs that will forgive a portion of your federal student loan debt. Consider, however, that you may have to work in the qualifying field for several years before qualifying and that the amount of the loan forgiven may be taxable as income. Check with your school or professional organization for information about loan forgiveness programs. Additionally, federal student loans are canceled if you die, meaning your spouse and children won’t be burdened by them.

6. Some Consider Student Loans “Good Debt”, If There Is Such a Thing

You may read about “good debt” and “bad debt”. Basically, some credit experts classify mortgages and student loans as “good debt” because they’re investments in your future, while consumer debt like credit cards is considered “bad debt” because there is little value attached to the debt. This distinction may come into play when you apply for new credit, for example. A lender will look more favorably on somebody with $200,000 in student loan debt from medical school than on somebody with $20,000 in credit card debt. The doctor has ten times the debt, but still looks better to future creditors than the guy with credit card debt.

• What about consolidation? Read more about student loan consolidation.

The other reasons student loans are sometimes called “good debt” is because they tend to have very reasonable interest rates and that interest may be tax deductible. At the end of the day, however, student debt is debt. When people ask whether you should pay down student loan debt early, I say: Only after you’ve paid down all your other non-mortgage debt, have an emergency fund, and are saving at least 15 percent of your income for retirement.

Related posts:

1. What is the Difference Between a Subsidized and Unsubsidized Stafford Loan?
2. Student Loan Consolidation Made Easy
3. Student Loans Drying Up: What You Must Know About Borrowing This Fall

And then you get a mailing or a phone call. Consolidate all those student loans into one low payment! Student loan consolidation sure is tempting. But is it wise?

What is Student Loan Consolidation?

Student loan consolidation is taking one or more student loans and repackaging them into one loan with one fixed interest rate and one payment. There are consolidation options available for both federal student loans (Stafford, Perkins, and PLUS loans), as well as private student loans.

Most student loan consolidation programs are completely legitimate and may, in fact, make it easier to manage your student loan debt. That said, many consolidation programs market benefits that are misleading. Before consolidating student loans, make sure you have all the facts.

The Benefits of Consolidation

Consolidation can allow you to make one payment for all of your student loans. That’s far easier than making several payments and remembering different due dates. Not only will you save time and frustration, you’ll be less likely to accidentally miss a payment and incur fees and/or a negative mark on your credit report. Note: If you have both federal and private loans, don’t consolidate them together; you’ll likely end up paying a higher interest rate on your federal loans than necessary.

Student loan consolidation can lower your monthly payment. If you’re struggling to make your student loan payments, consolidating can lower you monthly payment. But watch out! Lowering your payment means extending your repayment period from 10 years to 15, 20, or even 30 years. The longer you take to repay the loans, the more interest you’ll pay, although you can always start to pay down your loan balance faster when you’re earning more.

Consolidation gets you a fixed interest rate. Most student loan consolidation programs move loans with a variable interest rate into a loan with a fixed interest rate. If you still have variable-rate student loans, this may save you money over time if interest rates get higher. Note, however, that all federal loans disbursed after July 2006 and all Perkins loans already have fixed interest rates, somewhat negating this benefit.

No credit check for federal consolidation. There are no credit requirements for federal student loan consolidation.

Consolidation Pitfalls

Don’t consolidate until after you graduate. It’s wise to wait until after graduating to consolidate your student loans. Of course, you want to make sure you include all your loans in the program. But you also want to make sure you don’t give up one of the biggest perks of subsidized federal loans—interest does not accumulate while you are in school or during your grace period.

Be careful with Perkins loans. Perkins loans have unique benefits like a fixed five percent interest rate, nine-month grace period, and a forgiveness program for qualifying teachers and Peace Corps volunteers. If you consolidate, you may lose some of these benefits.

Don’t trust every offer. Your best bet is to pursue consolidation through one of your existing loan service providers or a company recommended by your financial aid office. If you have Direct loans, visit http://www.loanconsolidation.ed.gov/.

Be wary of consolidating loans jointly. Two benefits of federal student loans are:

• You can defer them if you become unemployed and
• they are canceled if you die.

If you and your spouse consolidate both of your student loans and one of you becomes unemployed, you won’t qualify for deferment (you’d both need to be out of work). Similarly, if one of you were to die, the other spouse is still required to repay the loan.

• Read More: Six Things To Know About Your Student Loans

What about you? If you have consolidated student loans or considered consolidation and chose not to, please share your experience in a comment. What would you recommend?

Related posts:

1. Student Loan Consolidation Made Easy
2. Understanding Student Loan Grace Periods, Deferment, and Forbearance
3. Six Things to Know About Your Student Loans

Deciding to expand my life after college in another country was a big decision and one that has challenged me financially and intellectually. As I packed up and left the good old U.S. of A. for law school on the other side of the pond (where lawyers sometimes wear wigs), I attempted to put my plethora of federal student loans into in-school deference or forbearance. Five separate enterprises own a piece of my undergraduate education totaling $50,000 at the time. Four of the companies put my loans into various types of in-school and hardship forbearance. The one that wouldn’t budge, however, was my Alma matter holding tight to my $3,000 Perkins loan and those $43.23 per month payments.

When a Student Loan Goes to Collections

Not only did I not have an extra $43.23 per month at that time but I didn’t even know how to transfer money from London to Boston in any way that didn’t attract at least $50 in fees. My deferments kept getting denied until the loan ended up in collections. If you’re familiar with a certain type of person from South Boston (think of the movie The Departed) and combine that with the evils of a third-party collections company, you can imagine those phone calls. They told me that they didn’t care where I was in law school; I needed to pay. And by the way, the loan had doubled in size, and I now needed to pay $6,000. Yesterday.

I used every skill they’d taught me in law school to refuse to speak to “Mark Wallburg Collections Co.” and instead spent Christmas break 2007 on the phone in a screaming match with the head of loan collections at my former college. According to him (but not the other four student loan companies), the fact that I went to a law school overseas prohibited me from getting an in-school deferment period. Furthermore, since I wasn’t paying U.S. taxes as an overseas student, I couldn’t prove that I was economically unable to pay. So, tough luck. Pay $6,000. Now.

How I Fought Back

I then used the public relations skills that I had learned at an internship (set up through that very university) to draft a press release outlining the way I had been treated and the various federal loan reporting laws they had broken. I went through old contacts and planned to send copies to everyone and anyone I could think of in Boston. I figured if it was a slow news day, the Boston Globe might pick it up as an interest piece. They love stories of how the Colleges in Boston screw over students.

But first, I showed my masterpiece to Head of Collections at my college and magically, my loan was put into in-school deferment—retroactively—and all charges and interest over the past year were removed. Sadly, it remains the most profitable piece of writing I’ve done yet (approximate value: $3,000)!

Repaying the Loan

When I finally started working as a lawyer and trying to change the path of my financial life through my blog Savings Not Shoes, I added the loan to the list of debts and it’s currently top of my list getting payments of between $500 and $1,000 per month. “Knee-Breaking Collections” is still on my credit report, which is annoying, but doesn’t really affect me as I am totally anti-debt these days.

You’ll imagine my surprise my college’s alumni association approached me and asked me to lead a new U.K. Alumni Club. It was finally time to try and make up for Christmas ‘07. I told the association that I would have been privileged to lead their overseas chapter in the U.K., if only I’d been treated with decency by the college’s student loans office when setting up my life over here, so I’d have to decline.

Now the alumni association has brought new life into my old tale of collections and woe. My goal is that it doesn’t happen to other students who perhaps didn’t learn as much in college—like writing press releases and having contacts on the Boston City Council.

Their veracity has impressed me enough to stop by when I’m in Boston at the end of the month and to go out to lunch with the alumni association. More importantly, I’m swinging by the loan office and giving them the remainder of the payoff amount for my loan…in person, and with a smile.

Related posts:

1. Student Loans Drying Up: What You Must Know About Borrowing This Fall
2. Six Things to Know About Your Student Loans
3. Understanding Student Loan Grace Periods, Deferment, and Forbearance

I didn’t forget about being nickel and dimed myself at the campus bookstore. Nonetheless, I later went on to work as a textbook sales rep. (Students: I’m sorry). And although the high cost of textbooks may no longer surprise you, the industry’s sexy underground might.

Why Are Textbooks So Expensive?

Escalating textbook costs is such an issue, a coalition of U.S. public interest groups has an entire campaign devoted to the problem (maketextbooksaffordable.org). The group claims that ongoing industry practices are designed to keep new textbook prices high and discourage people who buy and sell used books. And they’re right.

To be fair, publishers do need to make a profit. Given the time and expertise it takes to create a 1,000-plus page textbook and textbooks’ limited audience (thousands of potential buyers versus millions in the mass market publishing industry), textbooks are always going to cost more than the latest bestsellers.

What’s not fair, however, is how “Big Textbook” manipulates both professors and students into buying brand new books every year.

“Big Textbook” Industry Tricks

The college textbook industry employs a number of squirrelly methods to make sure every semester they sell as many new books at full price as possible.

• Changing Editions. It’s no surprise that publishers release new editions of textbooks. Given medical advances, who wants med students learning pharmacology on a first edition textbook from 1980? But are 13 editions of an intro microeconomics text really necessary? Publishers release new editions every two years or so under the guise of presenting the most up-to-date information. In reality, every new edition makes the old book obsolete and forces students to pony up for new books.
• “Bundling”. Here’s an even sneakier move: Every year, publishers create a component (like an online review code, CD, or a small workbook) for their bestselling books and “bundle” them together. This not only allows the publisher to up the cost of the bundle, but it also creates a new ISBN (the coding number used by all publishers and bookstores) for the same book. Although savvy students and bookstore managers can still order the original textbooks, many will be confused by the new book number and assume they need to purchase the new more expensive textbook bundle.
• Constant Pressure. All large textbook publishers employ sales representatives to push their books. And I mean push! Sales reps become best buddies with the professors that teach your classes (and choose your textbooks) by sending them loads of free books and buying them dinner and drinks. Then the reps call professors numerous times a semester to make sure the prof will be requiring their company’s latest and greatest textbook for upcoming classes. Sales reps are under constant pressure to close “adoptions” (industry lingo for when a prof goes with your book) and earn big annual bonuses for exceeding sales goals.

Inside the “Big Textbook” Party

Not only do textbook publishers manipulate professors and students on campus to minimize used book sales, they use all-expenses paid trips, dinners, and drinks to motivate sales reps, win over authors, and reward loyal professors who choose their books time after time.

During my four years at one of the world’s ten-biggest textbook publishing companies, I traveled from Boston to South Florida every January for four days of product training by day and corporate-sponsored debauchery by night. There was rarely much sleeping.

Other publishing companies all had similar annual getaways for sales staff to Florida, Vegas, and even Europe. The trips were designed to motivate and reward staff for working longish hours and endure hefty pressure for little pay. (Many sales reps are entry level employees with English majors that turned over every year or two. Those that stick it out and build rapport with professors can earn a bundle, however).

Outside of the annual sales meetings, the college textbook salesperson’s job involves a lot of phone calls and a lot of travel to visit colleges, attend trade shows, and wine and dine professors and textbook authors (most of whom also earn very little for their efforts, despite the books’ price tags). Although I cannot say for certain, I would estimate that if you looked at a pie chart of what makes up the cost of a college textbook, a noticeable sliver would account for such “travel and entertainment”.

Raises an eyebrow, doesn’t it?

What You Can Do to Control Textbook Costs

When you’re staring at a list of textbooks costing several hundred dollars for one semester, you probably don’t need prompting to find ways to trim your costs. Of course, buy used if you can. Once a new edition publishes, the old edition becomes virtually worthless on the used market, so ask your professor if you really need the very latest edition.

In response to outrage over textbook prices, many publishers are also experimenting with both digital versions of textbooks and with textbook rentals, which can cut the cost of a new book by 50% or more. Check with the publisher of your texts to see if either is an option.

I have to admit, working in the textbook publishing was fun, and I might still be there today if I hadn’t made the decision to move away from one of the industry’s hub cities. I could never escape the feeling that my escapades came at the expense of struggling students, but I also believe publishers are starting to see that light that students won’t give an arm and a leg for their books forever and that new options will emerge that will make textbooks more affordable while continuing to allow publishers to produce high-quality materials and turn a profit.

Related posts:

1. Avoiding the Freshman $1,500
2. How to Start a Business from Your Dorm Room
3. Back to School Financial Survival Guide

Most important: How much can you expect to earn with your bachelor’s degree? (A new report at PayScale.com may have the answer).

The PayScale College Salary Report

As the cost of undergraduate education skyrockets, prospective students and parents should be asking: What kind of return is this investment going to yield? Perhaps, like me, you’re out of school and still wondering the same thing.

Wonder no more. The PayScale College Salary Report provides median starting and mid-career salaries for dozens of bachelor’s-level majors and hundreds of colleges nationwide.

Yes, college rankings are old news. But it’s about time we learned what kind of bread the graduates of various colleges and majors are earning. Sure, student-faculty ratios and high bars-per-capita are still important, but salary stats will matter for forty years, not just four. Here’s a preview of what the College Salary Report offers:

Highest Paying Undergraduate Degrees

1. Aerospace Engineering
2. Chemical Engineering
3. Computer Engineering
4. Electrical Engineering
5. Economics
6. Physics

U.S. Colleges with the Highest Paid Graduates (Bachelor’s Degree Only)

1. Dartmouth College
2. Massachusetts Institute of Technology (MIT)
3. Harvard University
4. Harvey Mudd College
5. Stanford University
6. Princeton University

Does It Matter?

This College Salary Report is interesting at first, but I don’t find its results that surprising. I would have guessed that engineers earn more than English majors. Similarly, I hope Ivy League grads earn more than the rest of us. (Otherwise, why do students compete so hard and pay so much to attend them?)

What I would like to see is a report that combines a college’s alumni salary data with its tuition and average financial assistance. In other words, which schools cost the least but can earn you the most? In the meantime, this report is a start. (PayScale College Salary Report“>Access the full report).

What do you think? Should anticipated earnings play a role in students’ college and/or major decisions? Did salary expectations play a role in your decisions? Were the results what you expected?

Related posts:

1. What Are the Best Jobs for College Graduates Today?
2. Is That Degree Worth the Student Loan Debt?
3. Risky Business: When Student Loans Go to Collections

Determining What Your Degree is Worth

If a few simple math problems don’t scare you, there’s an easy way to determine if the degree you’re thinking about pursuing is worth the loans.

First, subtract your current age from the age you think you’ll retire. For example, 65 minus 25 equals 40 years to work. Next, determine how much you’ll think you’ll earn over your lifetime education level at your current education level. (You can use this lifetime earnings calculator).

Then, estimate how much you’ll earn after you get your new degree by placing your anticipated starting salary after graduation (see median salaries by degree for help).

Determining The Total Cost of Student Loans

Now that you have a rough estimate of how much you’ll make in your lifetime both with the degree and without it, it’s time to find out exactly how much those student loans will cost. Add up how much you think you’ll have to borrow. (And it’s probably wise to tack on 10-15% to your estimate for unexpected expenses and annual tuition hikes).

Then, use this amortization calculator to find the total cost of the loan. (If you don’t know the exact interest rate, 8% is a good average for student loans). For example, a $75k student loan at 8% paid back over 30 years would cost $522 a month and mean a total cost (principal plus interest) of $198,115.

Missed Investment Opportunities

That’s a lot of money. But wait, you say! The increase in my lifetime earnings is still a lot more than that. Plus, I could repay the loan faster, so the degree is worth it! Perhaps, but don’t jump to conclusions just yet. There’s something else to consider: What would happen if you invested the student loan payments you would’ve made?

If you invested $522 for 30 years and earned an average of just 6.5% interest (probably a conservative estimate), you’d add $577,425 to your bank account. That’s a net difference of $775,540! Now, you can make an accurate judgment.

If your anticipated lifetime earnings after earning your degree are more than $1 million more than your lifetime earnings without the degree, it’s probably worth a $75k loan. If not, you have to ask yourself long and hard whether it’s worth it. Certainly, you can’t put a price on happiness—and sometimes pursuing what you truly love is all that matters.

I would personally love to go back for a degree that would almost certainly increase my income, but after struggling with debt for more than five years, the last thing I want to do is to take out $50k, $75k, or $100k in more debt. No thanks! Instead, I’ll wait until I’m totally debt free and I have saved and can pay for all of my living expenses and at least 50% of my tuition as I go to school. But that’s just me.

What About You?

Have you made the decision to take out big student loans knowing they are a good investment? Do you have huge student loan bills and find you aren’t making what you thought? Let me know!

Editor’s Note: Check out the 197th Carnival of Personal Finance hosted by Four Pillars, in which we were included.

Related posts:

1. Student Loan Consolidation Made Easy
2. Student Loan Forgiveness Guide
3. Student Loan Consolidation

Stafford Loans in Plain English

Stafford loans are government-backed student loans that students (undergraduate, graduate, or professional) can take out in their own name to help pay for higher education.

There are two kids of Stafford loans:

• Subsidized Stafford loans
• Unsubsidized Stafford loans

The differences between subsidized and unsubsidized loans are who can qualify for the loans and who pays the interest on the loans while the student is in school.

When you take out subsidized loans, the government pays the interest on these loans while you are in school, during a six-month grace period following graduation, and during any authorized deferments. The fact that interest does not accumulate on the loan during the years you are in school can save you thousands in repayments.

Subsidized Stafford loans are need-based (i.e., the less you and/or parents earn, the larger the amount of subsidized loans you will qualify for). Even for eligible students, however, subsidized loans are subject to annual limits that may not cover the entire cost of tuition.

Unsubsidized loans are not need-based (anybody can apply), but you are responsible for paying all the interest that accrues during school, the grace period, and during deferments. You may make interest-only payments while you are in school (cheaper in the long run) or allow the interest to accrue during school and begin repaying the original principal plus accrued interest upon graduation.

Related posts:

1. Student Loan Consolidation Made Easy
2. Six Things to Know About Your Student Loans
3. Understanding Student Loan Grace Periods, Deferment, and Forbearance

Federally-backed student loans vs. private student loans

While there are many types of student loans, they can be generally divided into two categories: federally-backed loans and private loans. Federally-backed loans generally carry lower interest rates than private loans, but students can only borrow so much in federally-backed loans each year, meaning many students turn to private loans to fill the gap.

Understanding what type of loans you have—and the differences in repayment requirements—can save you from missing payments, damaging your credit, and paying additional interest and fees.

Student loan grace periods

When it comes to student loan repayment, federally-backed loans and some private loans may come with a grace period of between six and twelve months. That means that you will not owe your first loan payment until six-twelve months after your graduation date. Some private loans, however, will not have a grace period, meaning you’ll need to make your first payment as soon as a month after you graduate.

Student loan grace periods are designed to give graduates time to find a job. If you get a job before the grace period ends, you may wish to start making loan payments anyway to get into the habit of making the payments and to avoid additional accrued interest.

Even if you don’t start paying your loans early, it’s a good idea to determine what your loan payment will be and start setting that money aside. Use it to first pay down any credit card debt you may have and next to begin to save an emergency fund.

Student loan deferment

In certain cases, you may be eligible to for student loan deferment. Often, you may defer payments on your student loans if you go back to school full-time (i.e. to graduate or professional school), become unemployed, become disabled, or face another serious financial hardship.

Student loan forbearance

If you do not meet the criteria for a deferment, but are still having trouble making ends meet and paying your student loans, you may be able to get a student loan forbearance for a short period of time.

Contact your lenders to discuss deferment or forbearance options. (Note: If you’re going back to school, your student loan companies don’t know that until you tell them! If you stop making payments before confirming that your loans have been successfully deferred, your credit report could be in for a nasty surprise!)

Pros and cons of putting off payments

Make sure you understand both the advantages and disadvantages to student loan grace periods, deferment, and forbearance. With a few exceptions, interest continues to accrue during these periods. So while these programs let you get through your education without worrying about making loan payments, you do pay a price for the convenience.

Often, you can elect to make small interest-only payments on deferred loans. You won’t make progress on the principal, but the new interest will not capitalize over time.

If you’re out of school and working in certain high-need, low-paying fields, you may be eligible for a number of student loan forgiveness programs. Unlike deferment or forbearance which simply postpone your loan payments, forgiveness programs will actually cancel some or all of your loan!

Have you had student loans in deferment or forbearance? Was it a smooth process? Any words of wisdom for others going back to grad school or trying to get out of a rough patch financially?

Related posts:

1. Student Loan Consolidation Made Easy
2. Student Loans Drying Up: What You Must Know About Borrowing This Fall
3. What is the Difference Between a Subsidized and Unsubsidized Stafford Loan?

Volunteer service

If you service in the Peace Corps, you may apply for deferment of federal Stafford, Perkins and consolidation loans while you serve. You may also apply for partial cancellation of federal Perkins Loans for an amount equal to 15 percent for each year of Peace Corps service, up to a maximum of 70 percent.

Volunteers for AmeriCorps, which provides domestic disaster relief, community-building programs, and the popular Teach for America program, receive a stipend of up to $7,400 for one year of service plus up to $4,725 of federal student loan forgiveness. (Note: Teach for America participants receive a full teacher’s salary in lieu of the $7,400 stipend.)

The Volunteers in Service to America (VISTA) program coordinates volunteer service with private non-profits that battle domestic issues including poverty, huger, and homelessness. One year of VISTA service can earn you up to $4,725 in student loan forgiveness. Some “volunteers” also receive a stipend.

Teaching

Full-time teachers working in schools that serve low-income populations—or in high-need areas such as math, science, foreign languages, and special education—have a variety of student loan cancellation options. Teachers in these areas may be eligible for full or partial cancellation of federal Perkins and Stafford loans. More information about loan cancellation for teachers is available from the U.S. Department of Education and and the American Federation of Teachers.

Non-profit law

A variety of law school loan forgiveness programs are available for lawyers who enter public service or work in non-profit fields.

Medical professions

Student loan forgiveness for the students becoming physicians and nurses is available from the National Health Service Corps and the Nursing Education Loan Repayment Program. To be eligible for forgiveness from these programs, students must agree to practice for a number of years in high-need areas, which are usually remote or struggling economically.

The U.S. National Institutes of Health also offers a that may pay of up $35,000 per year of student loan debt for students involved in medical research.

New programs are popping up every year to encourage students to enter emerging high-need medical fields such as occupational and physical therapists and medical technicians. Check with your school (or schools you are considering attending) for up-to-the-minute information about medical loan forgiveness programs.

Military service

The U.S. Armed Forces offer several generous programs to help its members pay for their education. For example, members of the Army National Guard may qualify for up to $10,000 in loan cancellation.

Have you had a student loan forgiven through one of these or another student loan forgiveness program? What did the process entail? Was it worth it?

Related posts:

1. Understanding Student Loan Grace Periods, Deferment, and Forbearance
2. Student Loan Consolidation
3. Six Things to Know About Your Student Loans

Dependent vs. independent students

The government assumes that most students attending college will receive some kind of financial assistance from their parents if the parents can afford it. That support may include at least a partial payment of tuition fees, but a free room and hot meals while you’re studying also counts. Therefore, the feds consider undergraduates to be dependent students by default. (Graduate and professional students, on the other hand, are considered independent students by default).

What this means for undergraduates is in order to apply for federal financial aid, including grants, Stafford loans, Perkins loans, work-study, and more, you’ll need to get mom and dad to crunch some numbers and fork over their 1040’s – even if they’re not giving you a penny for school.

The government does provide an independent student designation for students that can convince their financial aid office they are truly independent.

Criteria for filing as an independent student

To complete a FAFSA as independent student, however, you must meet some pretty specific criteria. You must

• Be at least 24 on or before December 31 of the award year;
• Be an orphan (both parents deceased) or a ward of the court;
• Be a veteran;
• Be a graduate or professional student;
• Be married;
• Have legal dependents;
• Receive a waiver from a financial aid administrator for unusual circumstances.

If you can prove one of the above situations, you can change your status by completing a dependency review form (ask your college financial aid office for one). Be warned that unusual circumstances can be extremely difficult to prove, and changes in status are rarely granted (i.e. moving out of your parents’ house combined with the fact that they refuse to contribute for tuition is not a good enough reason).

Related posts:

1. What is the Difference Between a Subsidized and Unsubsidized Stafford Loan?
2. Student Loans Drying Up: What You Must Know About Borrowing This Fall
3. Six Things to Know About Your Student Loans