In addition to these federal programs, some states will cancel or repay your loan for working in certain jobs. For information on state programs, contact your state's higher education agency. (Go to www.studentaid.ed.gov; click on "funding," then "state higher education agency.")
Think long and hard about consolidating, as you have only one chance to do it. If you consolidate and interest rates drop later on, you may be out of luck. This happened to one New Yorker: "I consolidated my college and grad school loans in 1996, and now I'm stuck with a 9 percent interest rate until the end of time," he says. "I cannot consolidate again, even though interest rates are much lower now. Major bad call." Because interest rates have been attractive during the past few years, high rates haven't been a problem. But graduates should be aware of the potential danger.
Katie Rutan, who is finishing her last year at Lewis-Clark State College in Lewiston, Idaho, has two loves: She adores Idaho's Boise Valley, where she grew up, and she's passionate about sharing her knowledge of history. So applying for the Education Incentive Loan Forgiveness Program, which pays the college tuition of aspiring teachers who agree to work in Idaho, was a no-brainer. Each year, the state chooses 16 recipients by looking at grade point averages, teacher recommendations, and, in some schools, essays. Initially, Rutan was designated an alternate and resorted to student loans to pay her first-semester tab. But by the second semester, she had secured one of the coveted spots.
The state has paid Rutan's $3,126 tuition at Lewis-Clark every year (and even reimbursed her first tuition payment). In return, she must earn an undergraduate degree in teaching and work as an educator in the state for at least two years. It's a program offered in nearly every state for in-demand occupations such as teachers and nurses. Failure to fulfill the obligation means repaying the entire sum herself. "I always think it's funny they want me to be here for two years," Rutan says. "I could stay for 25."
Rutan didn't qualify for any need-based aid, but she received a $1,500 annual scholarship for good grades from her college's foundation. Her mother, a first grade reading instructor, and father, a school superintendent, give her an allowance and pay her rent in an off-campus apartment. And Rutan raises money by working 20 hours a week in the financial aid office. Even her book bill had less bite: For helping out with freshman orientation each year, Rutan garnered a $200 gift certificate to the bookstore.
Helpful hints
If you have a problem with a federal student loan—say, the balance is incorrect or the loan terms seem out of whack—and you can't resolve the problem with the lender, you can turn to a student loan ombudsman. The Department of Education ombudsman's office (www.ombudsman.ed.gov) will investigate the complaint and recommend solutions. Before the office will look into the matter, though, you must try to resolve the complaint with the lender yourself.
Never consolidate your student loans with those of your spouse. "That's always a bad idea," says CariAnne Behr of Mapping Your Future, a nonprofit financial aid website sponsored by 35 loan guaranty agencies. "If one of you dies, the loan can't be cancelled and the other spouse will have to pay it. If there's a divorce, you're both still liable for the debt."
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