CHAPTER 9

An Education in College Costs

There’s a lot of craziness about the whole college scene, and I’m not talking about frat parties. I’m talking about staggering tuition bills, shuttered lenders, and a student loan infrastructure that has gotten so big, burdensome, and out of whack that it literally ruins some people’s lives.

That’s sort of a paradox, because the truth is that college is one of the few expenses in life that it is really worth going into debt for. You’ve probably seen the statistics: A college degree is likely to be worth almost $1 million over a lifetime of earnings, according to a study done by the U.S. Commerce Department’s Census Bureau. That number goes up with every additional degree: Those with master’s degrees earn $400,000 more than college graduates over their earnings years. Those with PhDs earn $1.3 million more, and a professional degree such as a medical or law degree is worth roughly $2.2 million more than a bachelor’s degree over the long haul.

And college-educated people tend to be healthier and happier over their entire lives than those who stop their formal education after high school. So yes, that degree is an appreciating asset and well worth obtaining, even if you have to borrow money to do so.

But not too much money, and not in the wrong way. Tuition costs have risen at rates greater than inflation for 45 of the past 50 years, making college less and less affordable. (In the 2008-2009 school year, public colleges and universities raised their tuitions 6.4 percent on average, and private schools raised theirs 5.9 percent, according to the College Board. Consumer inflation, in the 12 months leading up to those announcements, was only 2.6 percent.) Some of the priciest private schools now charge more than $50,000 a year for tuition, room, board, and fees. Yikes!

Affordable forms of student aid, like government-subsidized loans and grants, failed to grow as quickly as those tuition bills. Banks and other private lenders saw that gap as an opportunity to profit and rushed in. In 2007, the student loan industry erupted in controversy, when Andrew Cuomo, New York State’s attorney general, investigated the industry and found ethical lapses. Some schools were steering students to lenders that had kicked money back to those same schools, or in the worst cases, to the administrators themselves.

Just as schools and lenders started cleaning up those ethical problems, the credit crisis hit. Many college lending companies exited the market altogether as the loans became less profitable. At the same time, the meltdown in the stock and bond markets slashed college endowments, and the recession squeezed state treasuries. Schools raised their tuition rates and fees to make up for their lower revenue streams, but cash-strapped families seemed less able than ever to pay the higher cost. The gaps between what colleges charge and what families can pay has continued to widen.

Some of that may change as President Obama’s education policies and budgets start to filter through the system. He has proposed that the federal government take over the student loan business through the Department of Education. Instead of guaranteeing loans from private lenders, the Department of Education would make all of the government-supported loans itself. He has also proposed that Washington put more money into grants for the neediest students.

But even if his plans become law, money for college will remain tight, and schools are likely to continue “gapping” kids—giving them less aid than their family needs to meet the school’s total cost. Government-guaranteed loans may become more costly as interest rates rise, and middle-class families will continue to find themselves squeezed the most, with too much income to qualify for the best financial aid but not enough to comfortably pay for college.

Every family has to figure out how to navigate all of this for themselves, because there are myriad ways to approach the college funding decision. There are some great strategies and tools for paying for college, even if you’re already a high school senior. And there are some smart new strategies and products for paying off college loans you may already have.

The best way to approach paying for college is by thinking of it on a time line. The solutions and strategies that work when you’re saving for your new baby won’t work if you wait until junior is 15 and taller than you are. Here’s a step-by-step approach to making sure your family has the money for college when you need it—without letting student loans squash your child’s dream career or future.

Baby Steps: Save, Save, Save

There’s nothing better than having the money in hand when it’s time to matriculate. If you’ve got the cash, you don’t have to worry about the financial aid morass, and your child can choose the school she wants on the basis of other factors. He or she may even stand a better chance of getting in if the school knows that you won’t be asking for aid.

So, start early. If you set up an account when your baby is still a baby, you can feed it with every birthday and family event. You can get grandparents and uncles and aunts into the act, too. If you can squeeze $250 a month into your child’s account, and earn an average of 5.5 percent a year on it, by the time he’s 18, he’ll have $82,726 to spend on college.

Years ago, the best way to save for a child was by putting the money in the child’s name. Parents saved taxes on the income that the money earned, because kids’ tax rates were typically lower than their parents’. But tax policies changed, and now kids must pay income taxes on investment income at their parents’ rates until they graduate from college or turn 24, whichever comes first.

Now, there are new ways to pay for college. Over the past few years, Congress has created and institutionalized two tax-favored forms of college savings: the Coverdell Education Savings Account and the 529 college savings account. I’ll tell you about them in a minute, but first, here’s a heads-up warning about both of them: Key provisions of both accounts will expire in 2010, and Washington will have to do something to keep them operating after that. Most experts believe Congress will act before the deadline—who wants to be the guy who stops people from saving for college? But that’s not set in stone, as they say, and these provisions could change after this year.

Coverdell Education Savings Account

The Coverdell Education Savings Account is the best first way to save for college if your income isn’t too high to qualify. In 2009, you had to make less than $110,000 a year in adjusted gross income ($220,000 for joint filers) to qualify; that limit will rise with inflation in 2010.

These alternative accounts, also called Education IRAs, allow you to set aside as much as $2,000 a year for each child. The money earned in the account is tax free if it is withdrawn to pay for college. You can set up your own Coverdell account at many mutual fund companies, banks, and brokers, and make all of the investing decisions yourself. That $2,000 may not seem like much, but consider this: If you put $2,000 into an account earning 5 percent for your daughter on the day she is born, and add $2,000 every year on her birthday, she’ll have more than $61,000 for college by the time she turns 18.

State-Sponsored 529 College Savings Plans

State 529 plans allow you to stash far more money, and offer better breaks if you are in a high tax bracket, but they are problematic. There are no income limits, and some states allow you to put as much as $350,000 into a 529 plan—over time or all at once. Some states also offer tax deductions for some portion of your contributions. And the money the account earns is not taxed if you use it to pay for college. You don’t have to use the money within the state, or for any state-sponsored school.

But these plans have their problems. Each state runs its own plan, usually with management from private financial companies, so you can’t choose your own money management firm. Many took very big risks in stocks and nonguaranteed bonds in the past few years, and families whose kids were just a few years away from college lost a lot of money in them. That wasn’t supposed to happen. Finally, some of them have very high fees. These problems can be so significant that Greg Brown, an analyst with Morningstar, Inc., a Chicago research firm, has called them “fundamentally flawed.” His advice? Use a 529 plan if you make a lot of money and have a lot of money available to save. And don’t just choose the plan your state offers; compare plans to see which one gives you the best combination of low fees and good investment choices. You can compare plans at these web sites:

• Saving for College: A clearinghouse of information about all aspects of saving for higher education (www.savingforcollege.com).

• College Savings Plans Network: A site sponsored by the states that offer college plans (www.collegesavings.org).

• Morningstar: This research firm analyzes the best and worst 529 plans every year (www.morningstar.com).

How to Fix Your 529 Plan

What if you already have a 529 plan (or several, one for each child), and have lost a lot of money in it over the past two years? Here are a few strategies you can follow:

Close the account and take the loss. You can close a 529 plan in which you have a loss and deduct your losses, but the rules for doing this are complicated. Instead of being a capital loss, the loss is counted as a miscellaneous deduction, so you only get to deduct your loss to the extent that it exceeds 2 percent of your adjusted gross income. And this could trigger the alternative minimum tax, so check with your tax pro first.

Switch plans. You can move money from one state plan to another once a year without penalty. If you suspect the plan you’re in is lousy, shop for a better plan and transfer the money. Even if you have to give up your own state’s tax deductions to get a better plan, that might be worthwhile.

Shift beneficiaries. If you have more than one child and the oldest one’s 529 has had big losses, consider finding another means of paying for the first child’s college and saving the 529 plan for a younger sibling.

Wait. You can pay the first year or two of your child’s college through other means and give the 529 plan time to recover some of its losses. Or save it until your child goes to graduate school. Most states do allow their plans to be used for that.

Save and invest for yourself. Finally, if you’re underwhelmed by the 529 choices out there, and either have maxed out on a Coverdell or make too much to qualify, consider just investing in your own name for your child. If you set up a mutual fund or brokerage account and feed it regularly, you can use the money for college when it’s needed, or save it for other family priorities if it isn’t.

You can sell losing investments and use those losses to offset gains. You can let that money continue to grow while your child is in school, and have your child take college loans. When he’s done with college, you can give him the shares, and he can sell them and pay taxes at his (presumably lower) tax rate. Then he can use the proceeds to pay off the loans.

You can also limit taxes in that account by using it to invest in tax-free municipal bonds and bond funds.

Saving money without using any specially designated account does give you a lot of flexibility. Just make sure you don’t put the account in your child’s name. There’s no tax advantage to that, and it could hurt his ability to get financial aid. Or get blown on his tattoo and piercings hobby as soon as he turns 18.

High School: Learn How the Financial Aid Game Works

There are steps you can take when your child is in junior high and high school to prepare her for getting the most possible financial aid. Of course, she should be preparing for this by getting good grades and participating in after-school activities, so that colleges will want to pay her to attend. The more you know about how financial aid works, the more ready for it you will be.

Here are the basics: When your child is a high school senior applying for colleges, you’ll be filing out the financial aid applications. State schools will use a federal formula and private schools will use their own private formulas for determining how much you and your child can afford to pay. This is called your expected family contribution (EFC). Each college will then, individually, figure out how much it costs to attend for a year, subtract your EFC, and then make up the difference with a package of federally guaranteed loans, grants (that are free money), and on-campus jobs for your child. Many schools now leave a gap between their price and the EFC for the family to fill with more expensive private loans. They tend to do this strategically, “gapping” the students they are only lukewarm about and not gapping those they really want.

That means there are two ways for your family to increase the aid your son or daughter will get: Make them more desirable to the school, and lower your expected family contribution.

The EFC weighs a number of factors, including your earnings and your savings, and the amount of money in the child’s name. It also considers your age on the theory that older parents need to keep more of their savings for their own retirements, whereas younger parents can afford to pay out more for college.

The best way to figure out how your family’s EFC will stack up is to run your family numbers through an online EFC calculator. One of the best is at the FinAid web site at www.finaid.org. This is probably the most authoritative independent web site about financial aid.

You’ll learn that having high taxable income counts against your child’s ability to get aid, and that having savings also counts against you, though having debts doesn’t help. Put that all together and you will learn some good strategies for positioning your child to apply for aid in her senior year. Here’s how:

• Sell winning stocks and mutual funds by December 31 of a child’s junior year of high school. That way those gains won’t show up in your taxable income in the year, starting January 1 of his junior year, that the colleges look at.

• Pay off debts with assets. Don’t keep a high-interest car loan and $25,000 in the bank if you think your child will qualify for aid. Pay off the loan and get that $25,000 out of your bank account.

• Shift earnings, if you have that ability, out of the child’s junior/ senior year and into earlier or later years; so take your annual bonus in December of his junior year and in January of his senior year, for example.

• Move money out of your child’s name. If your child has a sizable nest egg, spend it on him while he’s in high school, and replace it with savings in your name. Use it for summer camp and his cell phone, for example, and deposit a like amount into your account. Student money often counts more heavily in the EFC than does the parents’ money.

• Start hunting for scholarships. There are thousands of private scholarships available for students, some with big money and some aimed at very special targets, such as bassoon players, residents of specific counties, or people with certain names. Some scholarships are aimed at members of particular religious groups, or those aspiring to specific careers. The more narrowly focused the scholarship, the more likely you are to get it. The bigger awards are more difficult to get. But it’s one way (another is a part-time job) that students can contribute to their own education. You can find out all about scholarships and apply for them at FastWeb (www.fastweb.com).

Senior Year of High School: Tough Decisions

Early in your child’s senior year, you should establish at least a rough idea of how much you can afford to pay for college. This doesn’t mean you shouldn’t apply for high-priced schools; many of them have the most money to give away. But it will give you all an idea of what the family’s bottom line is.

In January of the senior year, start applying for financial aid by filing out the Free Application for Federal Student Aid (FAFSA) form, available from the U.S. Department of Education at www.fafsa.ed.gov. You must also fill out the PROFILE form, created by the College Board, for private schools, and available at the College Board’s web site (www.collegeboard.org). The schools on your child’s target list might have additional financial aid forms of their own.

By April 1, all of the schools will let your child know whether he was accepted. At the same time, the schools will send a financial aid offer to your student.

And this is when you have to analyze the amount of debt built into that package and make some tough decisions about loans.

What about Those Loans?

Students coming out of school with big debts are facing up to the realities that they can’t afford to go to graduate school, or choose low-paying public service careers, or stay home with their children, all because they are struggling with student loans. The advocacy organization Project on Student Debt has collected some of their stories. There are folks like Kevin, who owes $66,000 between undergraduate and graduate school and faces $500-a-month payments for the next 20 years. Or Lisa, who is unemployed and married to a teacher. She and her husband owe $127,000! They will be trying to scrape together cash for their kids’ college funds before they finish paying for their own.

So, minimize those loans, especially if your child isn’t sure of what he wants to do after college. To do that, consider alternative ways of saving money on the cost of college. Perhaps your child can squeeze four years into three, or work full-time and go to school part-time. Or take a year off between high school and college, to start earning money for school. Or start at a less expensive school or community college, do well, and then transfer to the pricier alternative for the last two years and the big-name diploma. There are options besides simply signing on the dotted line that the financial aid office will give you. Got that? Good. Now, it’s time to decide about those loans.

The financial aid package your child receives may include some grants and some work-study opportunities, but the bulk of the package is likely to be made up of loans. Here are the varieties you might encounter, and what to do about them.

Stafford Loans

These are the most common loans and can come directly from the U.S. Department of Education (called direct loans) or from private lenders receiving government guarantees (called a Federal Family Education Loan, or FFEL). Students with financial need qualify for subsidized loans; other students are offered unsubsidized loans. Some are offered a combination of both.

Unsubsidized Stafford loans have a fixed interest rate of 6.8 percent. Subsidized rates for the school year that starts in the fall of 2010 are 4.5 percent. They are slated to go to 3.4 percent in the following year. Interest is charged on Stafford loans from the moment the money is disbursed; the government pays the interest on the subsidized loans until the student leaves college.

The federal government limits the amount of Stafford loans any student can get, as follows:

• Freshman year: $5,500. No more than $3,500 of this amount can be in subsidized loans.

• Sophomore year: $6,500. No more than $4,500 of this amount can be in subsidized loans.

• Junior and senior year: $7,500 each year. No more than $5,500 of this amount can be in subsidized loans.

Students who are independent of their parents—or whose parents fail to qualify for government-sponsored loans—can borrow an additional $20,000 over the four years.

The smart strategy: Stafford loans are not bad, if you will need to borrow money for college. Rates are low when compared to other unsecured debt. They come with a variety of repayment options that can give you flexibility once you graduate and start paying them back. But they are loans, so you should consider other alternatives, which I’ll get to shortly. If you have another way to come up with this money, you are free to take the rest of the financial aid package and not take the loans.

And you can also comparison shop for Stafford loans. Even though they all charge the same interest rate, some lenders offer discounts during the repayment period for automatic repayments and making timely payments. You can check other offers at Simple Tuition (www.simpletuition.com) or Bankrate (www.bankrate.com) to see if there’s a better deal than the one your college aid officer is showing you. Your college has to process loans from other lenders, even if they aren’t on the college’s preferred list.

Finally, it’s a good idea to try to pay the interest on the loan while your child is still in college. The federal government will pay interest on the subsidized loans while she is in college, but if your child takes any unsubsidized Stafford loans, you can pay the interest yourself while she is in school. That will keep it from compounding on itself. And that interest may be tax deductible, too.

Perkins Loans

These are government loans aimed at the neediest students and awarded through the colleges. As Mark Kantrowitz of FinAid likes to say, “the Perkins loan is the best student loan available.” Because it is subsidized, the rates are a low 5 percent. Unlike Stafford loans, interest won’t begin to compound until nine months after graduation, and Perkins loans offer more opportunities for graduates to cancel their loans by going into public service jobs.

The smart strategy: If you must borrow for college and qualify for the Perkins loan, take it.

The PLUS Program

The Department of Education subsidizes a gap-filling program for parents that is called the Parent Loan for Undergraduate Student (PLUS) loan program. It is available to any parent regardless of income. These loans are also made either directly from the Department of Education or privately through the FFEL program. Parents with reasonable (not subprime) credit scores can qualify for PLUS loans that will completely fill the gap between the cost of college and the financial aid package. They aren’t cheap—PLUS loans charge 8.5 percent interest from the day the money is disbursed. And up to 4 percent in fees charged by the government and the private lenders is tacked on as well.

The smart strategy: Legislation passed in 2008 allows parents to defer PLUS loan payments until six months after the student has finished school, but don’t do that. Start paying as soon as you take the loan to keep the interest from snowballing on you. Consider other alternatives before you take a PLUS. And do comparison shop. PLUS lenders also offer discounts for various repayment options, such as making payments through automatic drafts from your checking account. You can find a comprehensive list of lenders and their discount offerings at Mark Kantrowitz’s FinAid site. You’ll have to fill out a separate credit application at the college financial aid office to get a PLUS loan.

Private Loans

After the government-sponsored aid is exhausted, there’s another category of loans you will hear about from your financial aid office. Private education loans are simply loans from banks and other lending companies that are used for college costs. They are like car loans, but without the collateral of the car, and usually have variable interest rates. They are loans to students who rarely have credit histories, so the rates can be astronomically high—18 percent or more. Parents are usually asked to cosign the loans, which can bring the rates down to prime plus 0.5 percentage points. You can get private loans through your school or through your bank, or through a number of other lenders (however, some lenders have left the market, claiming these loans aren’t profitable).

The smart strategy: Avoid private loans if possible. If you feel you must—say your child was accepted into a very competitive program that will allow him to graduate immediately into a great job, and your whole family thinks it’s worth it—then do cosign the loans, to keep the interest rates within reason. Comparison shop carefully, because there is a wide variety of products available in this category. Don’t be swayed by the name of the loan; some are branded with college names or titled to sound like government programs, but they are simply private loans. You should also check in with your credit union. Many offer college loans that are cheaper than the bank loans.

If you do get private loans, choose programs that let you start repaying them immediately, so that you’re not amassing additional interest on top of interest. For example, Sallie Mae has a new Smart Option private loan program that allows the students to pay the interest on their loans while they are in school. (Of course this often involves the parent paying the student to pay the interest.) But that is worth doing; it keeps the interest from compounding to astronomical levels, and it helps the student build a good credit score.

Private loans are also sometimes called alternative loans, but they aren’t the true alternatives I have in mind when I think of that word.

Alternatives from Your Own Life

When I think of alternatives to financial aid, I don’t think of pricey private loans. I think of other ways your family can raise the money. One place to look is your house. If you have substantial equity in your house, you can consider getting a second mortgage, refinancing your home to pull cash out, or using your home equity line of credit (HELOC) to pay some of those college bills. This is a good source of cash, far better than taking on an expensive private loan. The interest on the HELOC is likely to be tax deductible, and the rates are lower because it is secured debt. Of course, don’t put your house at risk for more than you can afford to pay, but consider this a reasonable alternative if you’ve got the equity and the means to repay the loans.

Then there are intrafamily loans. Perhaps grandparents have investments but need income. They can lend money to the college child or pay the tuition directly to the college, and you can repay them every month. Set up correctly, this can be a win-win situation; you can pay higher interest than your parents will probably earn elsewhere, and it will still be less than a bank loan. To do this, set it up right; you can set up a simple contract, or use a web site that will administer the loans for you. One company that does this is Virgin Money, at www.virginmoneyus.com.

There are also new peer-to-peer lending sites that you may choose to use. These sites put together people who need money with people who have money to lend and want to earn interest. The rates available on this site may beat those offered by banks, especially if you have a good credit score.

Leading peer-to-peer lending sites include:

• Prosper, www.prosper.com

• Fynanz, which specializes in student lending, www.fynanz.com

• Lending Club, www.lendingclub.com

• Loanio, www.loanio.com

• GreenNote, www.greennote.com

Finally, there’s good old-fashioned belt tightening. This is different for every family. I just spoke to one father of a Harvard undergrad who said, “We are mowing our own lawn and cleaning our own house for the next four years.” A single mother I know, who is scrimping to put her daughter through New York University, has rented out her daughter’s room for the four years she is in college. That may seem extreme, but on graduation day both mother and daughter will be happy they minimized the loans.

Credit Cards

You’ll notice that I haven’t mentioned credit cards as a source of college money, even though as many as 30 percent of college students are paying tuition on their credit cards, according to college lending company Sallie Mae. More than nine of every 10 college students use credit cards for textbooks, school supplies, or other education expenses.

Like other credit card use, this has two sides to it. Surely, some families are charging tuition for the convenience and the credit card rebates, and paying off their bills with savings. But too many students are charging themselves into trouble.

The average college student graduates with credit card debt over $4,100, says Sallie Mae, and most students are surprised at the size of their bills when they receive them.

So—don’t use credit cards for college, unless you’re one of those credit-card winners who is only doing it to juggle card rewards or make the most of those last few zero percent interest offers. Do encourage your kids to use one credit card in college for convenience, but make them receive and pay the bills themselves out of their own spending allowance. Parents who simply get the bills mailed to themselves and pay them while their child is in college aren’t doing the kids any favors, and they aren’t teaching them anything.

After College: The Bills Come Due

Six months after you graduate (or withdraw from school without the diploma—a big mistake if you’ve got loans), your first payment is likely to become due on the loans.

Whatever else you do, do this: Pay your bills on time. Your payment history will be reported to the credit bureaus. And most lenders offer some rate reductions after you’ve made timely payments for a period of three years or so. Most lenders will also give you a discount if you agree to have your monthly payment drawn automatically from your checking account.

Students can consolidate all of their government-backed loans into one big loan, but the decision should be made carefully, as I’ll explain. Consolidation loans simply average the interest rate on all of the loans to come up with the rate for the new loan, so there isn’t an interest rate advantage to consolidating.

But consolidation does allow for a greater variety of payoff options: Consolidation loans can sometimes stretch your payback period for as long as 25 years, greatly lowering your monthly payment (but increasing the total amount of interest you will pay). With a consolidation loan, you can also get a graduated repayment plan, so that you make bigger payments in later years, when you presumably have a bigger salary. You may also be able to get an income-contingent repayment plan (from the Department of Education) or income-sensitive repayment plan (from private lenders), which adjusts your monthly payment annually, based on how much you are making. The whole consolidation loan business is in upheaval, with most private lenders having declared the business unprofitable and stopped making these loans. The Department of Education has picked up the slack. If you think you want to stretch out your repayments, you may find consolidation worthwhile. Here are my guidelines:

• Do consolidate PLUS loans. There’s a loophole on all of the federal student loan regulations that can save you a little bit of money if you’ve taken out PLUS loans. Mark Kantrowitz, publisher of the authoritative FinAid web site (www.finaid.org), explains it thus: The federal rules cap the interest rate on consolidation loans at 8.25 percent. But the current rate on PLUS loans is 8.5 percent. Consolidate them, and voilà! You’ve cut 0.25 percent interest off your debt. On a $25,000, 10-year loan, that only cuts $3 and change out of your monthly payment of $310. That’s not huge. But you could take yourself out for popcorn and a movie on your savings every few months.

• Don’t consolidate if you have a lot of Perkins loans. Their longer grace period and other advantages can be lost if you roll them up with your Stafford loans.

• Consolidate Stafford loans. This won’t save you any money, but it won’t cost you anything, either. And it’s easier to have one bill a month than half a dozen. You’ll buy yourself more leeway in paying the loans back, and if you stretch out their repayment you can use your cash flow for other items like a house down payment or a career wardrobe. You can always pay extra as your career builds to pay those loans down more quickly, if the interest rates stop seeming low in comparison to rates you could get elsewhere.

• Consolidate private loans, maybe. Consolidating private student loans is just like refinancing a car loan: Maybe it’s a better deal, and maybe it isn’t. Be sure to check with lenders to see if they are willing to roll several of your private loans into one, and what the new rate and other terms will be. If the interest rate is better, go for it!

New Options from Uncle Sam

In recent years, Washington has approved a few new programs to ease debt burdens on college graduates. See if one of these works for you.

• Income-based repayment plan. This program is aimed at people who want to work in low-paying fields, or who run into medical or other problems that keep them from working. It enables them to consolidate their government-subsidized loans into a more affordable loan. The income-based plan caps monthly payments at 15 percent of your monthly discretionary income, and defines discretionary income as the difference between your adjusted gross income and 150 percent of the federal poverty line. (The 2009 annual poverty threshold for a single person was $10,830; 150 percent of that is $16,245.) If, for example, your adjusted gross income as a schoolteacher is $35,000 a year, your monthly payments would be capped at $235. If your earnings are low enough, your monthly payment could go to zero. If, after 25 years, you still haven’t repaid your loans, they will be forgiven. You don’t have to consolidate to get on an income-based repayment plan. You can find out how to get an income-based repayment plan at a special site set up by the Project on Student Debt at www.ibrinfo.org.

• State teachers loan forgiveness programs. Looking for a career as a teacher? Many states and municipalities offer student loan payoff programs for their educators. They vary by state in terms of which types of loans are eligible and how the repayment plans work. But storm clouds are gathering: In the past couple of years, Kentucky, Iowa, Pennsylvania, and New Hampshire have cut back on these programs. If you’re getting ready to commit to a teaching program in the hope that it will repay your loans, check the state treasury and political climate first!

• Public service loan forgiveness program. Anyone aiming for a government or nonprofit career should consider consolidating directly with the Department of Education and stretching their payments as long as possible, so they can qualify for this new program. It will forgive any student debt remaining after 10 years, as long as you’re still employed in that field. There are many details, also available at the same IBRinfo web site. But it’s nice to see a new plan that really aims to help the helpers!