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KUSA - Even though many students are starting their summer break, now is a good time to start planning college finances.

The average student loan is between $25,000 and $30,000 and will likely take years to pay back.

However, there are some repayment options that can help make paying back those loans easier. 

"One of the relatively new repayment options is called income-based repayment, and your monthly payment is based upon how much you owe in student loans, how much you're currently making and the number in your family," Misti Ruthven with College in Colorado said. "This is something that is really underutilized that folks are not taking advantage of, and it's possible for the federal government, based on those three factors to think that you can't afford anything."

There are also loan-forgiveness programs that some can apply for.

"Public-service loan forgiveness is relatively new as well," Ruthven said. "This is for folks that are working for a nonprofit, that are working for a government agency. After folks make 10 years of on-time payments, the rest of their loan debt goes away."

Another way to avoid having to pay a lot in student loans is to make sure that students are not taking on too much debt to start with.

"In general, for students, it's really important to align your personal goals with your professional goals and to make sure that you are going to the right school," Ruthven said. "A general rule of thumb around taking out student loans is to think about what you are going to be making when you graduate with your degree and about every $10,000 you take out means about $100 in a monthly payment. So, is that realistic and aligned with how much you are going to be making when you graduate from college?"

Charlie Farrell with Northstar Investments agrees and says that students should never borrow more than 75 percent of your expected earnings.

"You have to look at your college education and figure out 'Well, how much am I going to earn based on the career I want to go into?' and don't borrow more than 75 percent of that number on average over your first 10 years of earnings," Farrell said. "That creates a repayment obligation of about 10 percent of your earnings, which is reasonable. That's something you can manage. Above 10 percent becomes very difficult with [all the other] things you have to pay for."

(Editor's Note: see this article Farrell authored about student loans:

http://www.inc.com/charlie-farrell/will-that-student-loan-sink-your-business.html)  

Before students start college, they need to go over the many different ways to pay for school, whether it be through a loan, by saving money or through various scholarships.
There are many different ways to save money for college. One is through a 529 plan.

"CollegeInvest is Colorado's 529 college-savings plan, and we think it's one of the smartest ways to save, because not only are you saving the money, not borrowing, but you also get Colorado tax deduction for every dollar you contribute," Angela Baier with CollegeInvest said. "Colorado, we are proud to say, has one of the most varied and unique 529 plans because we have four different flavors, instead of just one. You can use your financial advisor, you can go direct, you can also use an FDIC insured product if you prefer to save in a bank. We even have a product that has a guaranteed principle, guaranteed return for those that are maybe a little nervous to be out in the stock market."

Baier says that for some, saving is easier than borrowing.

"You get to put into act earning interest versus paying interest," Baier said. "It can literally cut the cost of college almost in half. The average student loan debt is $25,000, so if you were over 10 years to save to get $25,000, it would only cost you about $18,000. But if you would borrow that same $25,000 to pay it back in 10 years, the cost would be over $35,000."

 
Many students will try for scholarships. The website fastweb.com can help match students with scholarships they qualify for.

"It's very easy to find scholarships, and we publish a free scholarship-matching service," Publisher of Fastweb.com Matt Kantrowitz said. "It takes about half an hour to complete the scholarship background profile and matches you to all of the scholarships where you are eligible."

There are about 1.5 million scholarship opportunities worth more than $3.5 billion on the website.

James Broscheit, Director of Financial Aid at CU-Denver, says that students should apply for FAFSA, or the Free Application for Federal Student Aid. This form, which becomes available every year at the beginning of January, is the form that students need to get financial aid from federal and state government and most colleges.

"Schools have preferential-filing deadlines for that application," Broscheit said. "It is [first come, first serve] because of the money that is there. There are certain federal programs, [such as] the Pell Grant, that you can qualify for regardless of when you apply. Student loans you can generally get whenever you apply. Campus-based funds and/or funds that are available at the school are limited, so you have to get into those quickly."
Broscheit says that students need to make sure they pick the right school for both cost and career choice.

"In this day and age, you really want to make sure that you've investigated all of your different options," Broscheit said. "You really want to look at the college you're going to and you want to make sure that it matches the career choice that you're going into. See what those costs are. Find two or three different colleges that have that same career path for you and compare those colleges, see what they will offer you."

Here are some helpful links for financial aid: 

• http://www.fafsa.ed.gov/ 
• http://www.fastweb.com/
• http://www.finaid.org/
• http://www.collegeinvest.org/
• https://secure.collegeincolorado.org/ 

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