Gaining a college education is a must for practically everyone that wants to make a good living. Most people know they may have to take out a student loan in order to pay for their college education. Tuition costs continue to rise and students are finding it harder and harder to pay for their education costs, housing costs, and food expenses. If you can repay your student loans in a timely manner, they are not a bad idea. Unfortunately several people default on their student loans and ruin their credit. One common problem students run into is selecting a degree that is not in high demand and they then struggle to find a job that provides enough money to meet their student loan payments and other financial obligations.

Before obtaining a student loan, one must assess the different student loan options in order to determine if a student loan is a good idea. There are 3 main types of student loans:

• Federal loans
• Private loans
• Consolidation loans

Federal Loans
Federal family education loans (FFEL) and Direct Loans are the 2 largest government federal student loan programs. The FFEL loans are guaranteed loans that are made by private lenders. FFEL loans will be reimbursed by the federal government if the lender defaults on the loan. Before the government reimburses the private lender, the lender must meet certain requirements that showed they tried to collect the loan.

The federal Direct Loans are granted directly from the federal government to qualified students. The school will assist the federal government when they are granting the student loan. The U.S. Department of Education and Congress regulate the student loans and set the maximum interest rates on loans.

Perhaps the most well-known student loans are Stafford loans. A Stafford loan is available for undergraduate, graduate, and professional students that are enrolled in school at least part-time. The Stafford loans are made by the FFEL program and the Direct Loan program and they may be subsidized or unsubsidized. A subsidized loan will be granted based on financial need and the government will make all the interest payments until the repayment period begins. Unsubsidized loans are not given based on need and the borrower will be responsible for making all interest payments. The interest payments will be deferred while the borrower is attending school, but they will be added to the total amount of the loan when the repayment period begins. The Stafford loan limit will depend upon your financial income and if you are financially dependant or independent. Undergraduate students that are financially dependent can borrow up to $31,000 and independent students may borrow up to $57,500. The amount you can borrow will depend upon the length of the program you are enrolled in and what year you are in your studies.

Private Loans
Private student loans are used to fill the gap between federal student aid and the amount students can actually afford to pay for college. Private student loans do not allow the same flexibility as federal student loans and they often have larger interest rates and set repayment options. Private student loans should be the last option a student considers when they are looking for options to pay for their schooling. From the time the loan is dispersed, the interest will accrue and several students end up with a loan that has grown by 10% or more by the time they finish their education. Private student loans are expensive and riskier than federal student loans.

Consolidation Loans
The final student loan option is a consolidation loan. A consolidation loan is similar to a loan refinance. Consolidating all your student loan debts will allow you to lower your monthly payments and it will allow you to lock in a fixed interest rate. A consolidation loan will extend the repayment period on a student loan and you do not always get a lower interest rate. The largest downside to a consolidation loan is the overall cost increase over the life of the loan. Another big problem with a consolidation loan is converting a federal loan to a private loan. Despite all the problems with loan consolidation, you can at least combine all your student loans together and have just one monthly payment.

Student loans are classified as good debt. Like a mortgage or business loan, a student loan will provide some type of return for its investment. The average student loan debt per student is $21,000. When the student loan reaches its repayment period, many students are unable to afford the payments along with their rent or mortgage payments. Financial advisors do not recommend private student loans because they are similar to credit cards. There is not a limit on how much you are able to borrow and these lenders make up to 20% of the education loan dollars. Private loan lenders know they will be paid back, and they imply strict rules to ensure they will be repaid. Student loans are considered unsecured debt, but you cannot have them erased if you declare bankruptcy.

If you need a student loan, there are a few tips to keep in mind:

• Borrow only what you need and try to keep your debt to a minimum.
• If you do borrow, your payments should be less than 10% of your expected monthly income when you obtain your first job after you graduate.
• Parents that obtain student loans for their children need to keep their total debt amount under 35% of their gross pay. The total debt will include credit cards, car loans, mortgage payments, and student loan payments.
• Try to avoid borrowing from more than one lender. It is easy to lose track of your debt and become confused about the amount of debt you have actually accrued.

When you are applying for student loans, try to figure out how much they cost by using an 8% interest rate. The student loan rates are starting to drop and will drop to 3.4% by 2011, but for now it is best to use a larger interest rate to gauge your monthly payment amount. For a 10 year loan of $23,000, your monthly payments will average about $276. Knowing the amount you will be expected to pay after you graduate may even help you select a field of study that will pay for the loan. Undergraduate degrees average around $40,000 depending upon your field. Psychology majors only make about $26,000 right out of college, so incurring a lot of debt in college will make it difficult to afford the monthly payments on that salary.

There are excellent alternatives to student loans, like scholarships, federal grants, and employer-reimbursement. Before you begin to think about obtaining a student loan, start applying for scholarships to different schools. Explore your options and consider the college that is trying to recruit you. Colleges that are interested in you typically have better financing options than other colleges or universities.

Instead of attending a college or university right out of high school, consider lower-cost alternatives like community colleges or two-year schools. Obtaining your associates degree from a two-year school and then transferring to a four-year school will help you save money and even be accepted to a higher ranking university.

Another way to help pay for your education costs is to participate in student government or after-school programs. If you become a tutor, you may even get paid and gain college credit for doing so. Student government positions often come with full or part-time scholarships and they may include housing and book costs as well. Check for every possible way to pay for your schooling with the school's financial aid department. They will let you know if you qualify for a grant and they can help you explore other options.

Consider getting a part-time or full-time job to help pay for your educational expenses. Instead of getting a loan with interest rates, try to make enough money to afford your schooling. This may mean you might have to take a semester off and work two jobs in order to afford the next semester. Getting a job will help you contribute at least some money to your tuition expenses. If you do decide to get a job, search for an employer that offers tuition reimbursement. If you are already working for an employer that is in your field of study, ask them if they will donate some money to your education. Several employers will reimburse at least half of their current employee's education expenses if they are enrolled in school while working for the company. Nurses often have one of the highest-paying employer reimbursement programs and the employer will even pay them a sign-on bonus to finish their degree. Search for a job that can be flexible with your school schedule. Call centers tend to work around student schedules and they like to hire students because they usually will take the weekend or night shifts that full-time employees don't want.

No matter how you decide to fund your college education, never get into more debt that you can handle. If you are going into a career that pays less than $30,000 per year, try to keep your student loan debt under $10,000 so you can easily afford the payments after you graduate.