We’d all like to go to college on scholarship or grants, but the reality is there’s only so much free money to go around. And if you choose to go back to school part time while you work (because giving up food is just not an option) then your chances of obtaining a scholarship or grant are even slimmer. (Benefactors tend to give money to full-time students with no other sources of income.)

That leaves the dreaded college loan. We’ve all heard horror stories about graduates having their credit permanently damaged as a result of not repaying their college loans in a timely manner. Or where balloon interest on a college loan inflates upon graduation, leaving the new graduate to start life so deep in debt, it will take decades just to make a dent.

While it is true that managing any debt requires a fair amount of responsibility and willingness to stay on top of the payments, college loans are not nearly as complicated, scary and financially crippling as they used to be. Basically college loans boil down to three categories: government student loans, parent loans, and private student loans.

Government Student Loans (GSL)

GSLs are funded by the federal government, have extremely low interest rates, don’t require credit checks, and offer a plethora of repayment plans. This is where it gets tricky, because if you defer repayment of your student loans until after you graduate you might become comfortably accustomed to a lifestyle and budget that does not include a monthly student loan payment. So (Surprise!) when the government one day comes knocking, expecting a payment, and you haven’t planned for that, well, things can get financially ugly very quickly.

Your repayment plan depends on which GSL you get. There are two; the Federal Stafford Loan and the Federal Perkins Loan. The Federal Stafford Loan has a fixed rate of 6.8% and repayment can be deferred until after you graduate. However, to help offset your debt upon graduation you can set up payment plans for as little as $25 per month while you’re still in school.

To qualify for the deferred payment option you must show need via your tax returns. Two thirds of Stafford loan recipients have a family adjusted gross income (AGI) of $50,000 per year. However, a smaller percentage of recipients have an AGI of up to $100,000. So unless you’re really rolling in the cash, it’s worth your while to look into a Stafford loan.

The Federal Perkins Loan is a little harder to get because it’s a smaller pool of funds and is awarded to students with extreme financial need. Also, Perkins loans are school-based, meaning the individual schools decide who should get assistance however, the loans are funded with government issued money. The interest rate is 5% fixed and the federal government absorbs all the interest while the student goes to school and up to 9 months after graduation. It’s the best deal around, if you qualify.

Parent Loans

If your parents still claim you as a dependent they can take out a Parent Loan for Undergraduate Students (PLUS) loan. In this case, your parents are on the hook for repayment, not you. Like the Stafford and Perkins loans, PLUS loans are government issued, but have an interest rate of 7.9% fixed. Repayment starts 60 days after the last of the loan has been issued (even if you’re still in school), and your parents can take up to 10 years to pay it off.

Private Student Loans

Private Student Loans (PSL) are also called bridge loans because they’re meant to bridge the gap between what the government will loan you to pay for college and what your college tuition actually costs. Unlike the loans mentioned above, PSLs are privately funded by lending institutions, banks, endowments, trusts, and wealthy individuals acting as private lenders. Because there is no safety net in case you default, your credit score pretty much determines if you’ll get a PSL. However, on the bright side there are no lengthy, federal forms to fill out. But because PSLs are privately funded interest rates and repayment plans vary.

Even though a PSL might be easier to obtain (depending on the lender) you should be very careful when you engage in one. To be safe it’s best to have a loan officer or even an attorney check over your lending contract before you take out a privately-funded student loan. Nothing worse than getting into a legal, financial squabble before you even graduate from college.

Now more than ever going back to school is a wise choice. Once the dust settles in this economic downturn wouldn’t you love to be poised to start a new career? That can happen if you take a little time to plan out your college tuition payment options. Depending on your school, major, and financial situation, a college loan may be just the ticket you need to put you on the path to a whole new career.

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