Borrowing Terms Get Better For Students

Deciding where to go to college can seem like making a deal with the devil these days.

You can obtain a premium education at one of the top schools in the world, but there's one tiny catch: You just have to give up your firstborn child and two appendages of your choice. Or live in debt -- forever! (Cue evil laughter.)

Gary Carpenter, CPA, executive director of the National College Advocacy Group, says students should have an idea of how they're going to pay their loans back before they ever set foot on campus. And that means if your chosen profession might have you eating beans and ramen noodles into your 40s, the expensive private school might not be the right place to go.

At the same time, thanks to some important changes in student loan rules and regulations, students will likely have more latitude in their school choice because they'll have help in their struggle to repay daunting college debts.

For instance, beginning in 2009, a new program called Income-Based Repayment offers some relief.

Lauren Asher, vice president for The Institute for College Access and Success, was part of the group that worked to develop the underlying policy proposal that resulted in this program.

She says that in addition to assuring individuals that their loan payments won't put them in the poorhouse, this program will help when you're deciding whether you can afford to go to a particular college.

"It's impossible to predict the future and know what you're going to earn and what you can afford to repay," she says.
Head of the class
The combination of new laws, smart borrowing decisions and money-saving techniques can help students graduate from their college of choice.

Avoid unnecessary debt
The ever-growing expense of a higher education has been well documented, but college degrees are not a luxury in this day and age; they're a necessity. On the other hand, it's important for students to be practical about what they're getting from the deal.

A recent study from PayScale found that graduates from Ivy League schools make more money than their plebian counterparts. But don't assume that going to an expensive school automatically guarantees a big salary.

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Bankrate.com's Guide to Wise Borrowing:

• Smart Borrowing: Learn About Loans
• Risky Move: Borrowing From Your 401(k)
• How to Juggle Debt and Savings

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"Case in point," says Carpenter: "I had a student who was going to a private school in upstate New York and she was studying to be a social worker. She was going to incur about $80,000 worth of debt and when she got out of school, she was going to be hired by the state of New York and get a job that would probably pay about $35,000."

By going to a public university with the same program, the student was able to cut about $50,000 off her college bill.

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