This is the third post in a series about student loans by guest blogger Sharon Cabeen. Sharon is director of financial literacy program operations with TG. You can reach her at (800) 252-9743, ext. 6781, or by email at sharon.cabeen@tgslc.org. Additional information about TG can be found online at www.tgslc.org.

As we all know, the job market in the current strained economy is challenging at best, meaning that today's college graduates have to work harder to land job opportunities than their predecessors a few years ago. But of course, navigating the job market without a college degree can be more difficult still, making a college degree a crucial asset for every new job seeker.

Given these challenging circumstances, many recent grads may find it difficult to begin or continue repayment of their student loans. As I described in a recent post, the federal student loan program provides a variety of repayment plans to suit a borrower's needs. These plans can help lower monthly payments and (under certain circumstances) even forgive remaining debt at the end of a preset repayment period.

But what if these options don't go far enough? While flexible, these plans may not provide the immediate relief a borrower needs, or they may not address the particular circumstances a borrower faces.

Thankfully, borrowers have options. This post focuses on deferment, forbearance, and consolidation, paths that may help borrowers address these difficulties and stay on track for successful repayment.

Deferment

Sometimes, even a borrower's best-laid plans for student loan repayment can be affected by life's changes – such as the loss of a job, a difficult economic stretch, or maybe a decision to go back to school.

In situations like these, a borrower may not be able to make his or her monthly payment. To find relief, the borrower should consider applying for a deferment, which will allow him or her to postpone repayment of their loans. For subsidized undergraduate loans, the government pays the interest during the deferment period. Importantly, deferments are entitlements, meaning that if a borrower qualifies for one, the lender or servicer is required to grant it.

Nine types of deferment are available that cover a variety of situations. The most common deferments are in-school, unemployment, economic hardship, and military deferment.

Forbearance

If a borrower doesn't qualify for deferment, he or she may request a forbearance. Forbearance is similar to deferment in that it can provide a borrower relief from student loan payments. Under forbearance, a loan holder or servicer temporarily permits a borrower to cease making payments, provides an extension of time for making payments, or temporarily accepts lower payments than were originally scheduled.

Forbearance differs from deferment in that while a deferment is an entitlement, a forbearance is generally granted at the lender's discretion. As mentioned above, during a deferment, the interest on subsidized undergraduate loans is paid for the borrower. During forbearance, on the other hand, interest continues to accrue unless the borrower makes interest payments. The interest is capitalized, increasing the principal balance of the loan along with the amount of interest the borrower must pay in the future.

While obtaining a forbearance is better than missing loan payments, deferment is the less costly option. Borrowers interested in forbearance should check with their loan holder or servicer to see if they qualify for a deferment first.

Consolidation

For a variety of reasons, many borrowers have multiple loans issued by multiple loan holders. When they leave school, they find themselves having to make payments on each loan each month, with different payment amounts to different locations. Keeping up with all of this can be confusing, to say the least.

A borrower in this situation may be able to combine – or consolidate – them into one loan. Under this program, the Department of Education issues a new loan (the Consolidation loan) to pay off the remaining balances of each loan the borrower took out. The borrower then has to make just one monthly payment to one loan holder.

Borrowers can also usually extend their repayment period by consolidating, although this of course increases the amount of interest they pay over the entire repayment term. Because consolidation is often a one-time decision, however, borrowers should learn as much as possible before deciding to consolidate.

For more information

For more information about each of these options, as well as links to relevant forms borrowers can use to help choose one of them, visit TG's Helpful Repayment Options page.

"Everybody likes more cash," according to a current TV commercial. No surprise there. And most people get excited about a tax refund, even though it's their own money they're getting back. But it feels like "found money" – money that isn't part of our usual budget and isn't already earmarked for dull things like groceries or rent. It's a lump sum that we feel that we have complete control over. We can use it to achieve a goal like paying off a debt, jump-starting saving , or making a major purchase.

What would you do if you came into some extra money? Seriously, stop and think for a second. What would you do if you had an unexpected $50? $100? $1000? Write that idea down. Or better yet, click the comment button at the end of this post and commit to that idea by sharing it with me and with other readers of this blog.

Now, let's talk about ways that you could generate the income to put toward that goal.

I recently led a brainstorming exercise about ways to increase income. Here are some of the ideas they came up with:

• Have a yard sale
• Take clothing to a resale shop
• Recycle aluminum cans
• Sell old gold
• Teach something you know
• Be an election judge
• Be an extra in a movie
• File an amended tax return to claim deduction or credits you missed
• Jury duty
• Sell plasma
• Participate in a marketing focus group
• Be in a medical study
• Look around the house and in the car for loose change
• Make crafts to sell
• Pet sit
• Sell items on Craigslist, Ebay, etc.
• Help older adults with activities of daily living
• Provide adult care
• Trade services – barter
• Tutor
• Apply for food stamps or public aid
• Make invitations, stationery
• Collect money other people owe you
• Contribute to you 401(k) and get the company matching money

I bet there's at least one thing on this list that you could do. And there are lots more ideas where those came from. For years, I've done this brainstorming activity as part of a train-the-trainer program from University of Illinois Extension called All My Money. I've collected more than 300 ideas – and that's after I eliminated the ones I was pretty sure were illegal. Check the complete list to get more ideas.

Don't forget to click "Leave a Comment" below to tell me how you want to use that extra money. Then, go for it!

This is the second post in a series about student loans by guest blogger Sharon Cabeen. Sharon is director of financial literacy program operations with TG. You can reach her at (800) 252-9743, ext. 6781, or by email at sharon.cabeen@tgslc.org. Additional information about TG can be found online at www.tgslc.org.

Thanks, Sharon, for providing this useful information for our readers.

As I wrote recently on this blog, college is an exciting, important time for expanding your horizons and preparing for your career and life to come. It's worthwhile financially, too: As reports continue to suggest, earning a college degree is one of the surest investments out there. (For a striking illustration of this, check out this chart from TG's Adventures In Education website.)

As with all investments, however, college requires an up-front financial commitment in order to reap the benefits down the road. For most students these days, that commitment comes in the form of student loans, and while it's easy to take advantage now of money you may not have to repay for years, eventually those bills start rolling in. Often, students take out loans with only a dim understanding of how their repayment obligation may affect them once they graduate. This post will focus on what students need to know in order to mange loan repayment in the way that works best for them.

First, borrowers should know that for most federal student loans, a "grace period" of six months begins once they leave school. This provides a welcome payment-free window in which to look for a job, move to a new permanent residence, and get organized in the working world. Borrowers should take note of when their grace period ends, however – it can be easy to lose track of when their student loan bills are coming due at the end of it!

Borrowers should be aware that during their grace period they can choose which plan they want to enter into for repaying their student loans. If they make no selection, they will automatically be entered into the standard repayment plan – which may or may not be the best choice for them.

So what options do borrowers have for repaying their federal student loans? Let's take a look at the six repayment plans federal student loan borrowers can choose from.

Standard Repayment Plan

Under this plan, borrowers repay their loans in fixed monthly amounts over a ten-year repayment term. The minimum monthly payment is $50 or the monthly interest accrued on the loan, whichever is greater. This plan generates the lowest total interest costs over the total repayment period. As mentioned above, this is the plan borrowers will automatically enter if they don't select a different plan.

Of course, for borrowers with substantial student loan debt, the monthly repayment amount under the standard plan may be difficult or impossible to manage on their current income. If this is the case, they may be able to choose other repayment options. These are described below.

Extended Repayment Plan

Borrowers with at least $30,000 in student loan debt can qualify for this plan, which lengthens the payment term from 10 years to at least 12 and no more than 25 years. Like the standard plan, under this option borrowers pay a fixed amount each month. Extended repayment lessens the burden of each monthly payment, but of course increases the interest amount paid over the total repayment period.

Graduated Repayment Plan

This plan provides for smaller monthly payments at the beginning of the loan term, then gradually increases the payment amount every two or three years. The repayment period is 10 years unless the borrower qualifies for extended repayment. Choosing this plan requires optimism on the part of the borrower that his or her income will increase significantly and regularly over the repayment period.

Income-Based Repayment

Income-Based Repayment (IBR) is the newest plan available for borrowers with high debt; it was introduced by the College Cost Reduction Act of 2007 and became available in 2009. Under IBR, monthly payments are based on a borrower's income, family size, and student loan debt. Borrowers can choose IBR if they qualify as having a partial financial hardship, which is determined by comparing the borrower's income to the poverty guideline for the borrower's family size.

Borrowers have to reapply for IBR every year, and so their payment amount may change every year. But the IBR plan can greatly reduce monthly payment amounts, and any outstanding principal and interest still owed after 25 years of qualifying payments will be forgiven. Borrowers can access an IBR calculator at www.AIE.org/ibr to estimate their monthly payment amount if they qualify for this plan.

Income-Contingent Repayment

As with IBR, under the income-contingent repayment (ICR) plan, the borrower's monthly payments are recalculated each year on the basis of the borrower's income, family size, and student loan indebtedness. Unlike IBR, if the payment doesn't cover the accumulated interest, the unpaid interest will be capitalized once a year, up to 10 percent of the original amount owed. If the borrower hasn't fully repaid his or her loans after 25 years, the remainder will be forgiven, but the borrower may have to pay taxes on the amount that is discharged.

ICR is only available on loans issued under the Federal Direct Loan Program (FDLP), in which the U.S. Department of Education acts as the lender. Beginning July 1, 2010, all federal student loans are originated under this program.

Income-Sensitive Repayment

Income-sensitive repayment is available on loans issued under the Federal Family Education Loan Program (FFELP), in which private lenders issued federal student loans. Beginning July 1, 2010, all loan originations ceased under this program, but many of today's student borrowers have FFELP loans. As with IBR and ICR, this plan adjusts monthly payments annually based on the borrower's income, family size, and student loan debt. Unlike IBR and ICR, the maximum repayment period under this plan is 10 years.

Learn more

For more information on each of these plans, as well as calculators to determine what monthly payments might be under each of them, visit the Department of Education's Repayments and Calculators page. For side-by-side charts displaying monthly payment amounts and repayment periods for each plan with various loan balances, visit TG's Comparison of Repayment Plans page.

This week, we're pleased to welcome Sharon Cabeen as a guest blogger to Plan Well, Retire Well. Sharon will be writing a series of posts on a financial issue that we have not addressed here before: student loans. Sharon is director of financial literacy program operations with TG. You can reach Sharon at (800) 252-9743, ext. 6781, or by email at sharon.cabeen@tgslc.org. Additional information about TG can be found online at www.tgslc.org.

College is an exciting time. It's a time for new friends and new experiences, for learning and for expanding one's horizons. Given this excitement, most new college students give little thought to what lies on the other end – entering the adult world, looking for a job, and, perhaps most crucially with today's high college costs, repaying student loans.

While no one wants to dampen the enthusiasm that comes with going to college, the unfortunate reality is that too many students leave college without a clear understanding of their responsibility to repay their federal student loans, or even of how they should go about doing so. Over the next couple of months, TG will be presenting a series of posts to help the readers of this blog – as well as the student loan borrowers they may communicate with – understand the repayment plans federal student loan borrowers can choose from, the options available should borrowers have difficulty with repayment, and the consequences of failing to repay student loans in a timely manner.

So what do students need to know as they sign on the dotted line – or, increasingly, as they press a button on their computer screens – for the student loans they need in order to pursue a higher education? For one thing, they should know that, for all the negative press associated with student loans in recent years, what often isn't emphasized are the positive effects of repaying student loans on time. These include retaining borrower benefits such as reduced interest rates, options for deferment and forbearance, and an improved credit rating.

Another thing recent graduates should be aware of is the possibility of having to make payments to more than one loan holder, involving multiple due dates and loan payment amounts. This circumstance can be confusing and cumbersome to manage, presenting a challenge to successful loan repayment.

Borrowers should also know that, as daunting as repaying their student loans may seem, they can choose from a variety of repayment plans to suit their income and their needs. Some of these plans can reduce the strain of high monthly payments for those with particularly substantial student debt. For those struggling to make payments at all, deferment and forbearance offer the possibility of postponing loan repayment until better financial circumstances arise.

Finally, students taking out loans should know that neglecting to make their student loan payments can lead to unpleasant consequences. These can include a damaged credit rating, increased financial burden from collection fees, and the possibility of garnished wages.

Clearly, new college students should enjoy the excitement and possibilities going to college offers. If borrowing for that education makes it possible, students should have no reservation about doing so. But they should also be aware of the obligation to repay their student loans, the repayment options available, and the benefits of managing loan repayment responsibly.

Look for a future post on the variety of repayment plans students can choose from, coming soon.

Sharon Cabeen

There are currently eight tax breaks that can help you reduce the cost of college or other post-secondary education. Whether you're saving for college for your kids, paying for classes you're taking right now, or making payments on student loans, there may be a tax break for you:

Saving for future expenses

• Coverdell Education Savings Account
• Qualified Tuition Programs (529 Plans)
• Savings Bond Interest Deduction

Paying for current expenses

• American Opportunity (Hope) Credit
• Lifetime Learning Credit
• Employee Assistance Plans
• IRA Withdrawals

Making payments on student loans

• Student Loan Interest Deduction

The Higher Education Expenses Deduction expired at the end of 2011. However, it has been extended several times in the past and there's always a chance that could happen again before the end of 2012.

Here are some facts you may not know about these tax breaks:

If your income is too high, you won't be eligible for most education tax breaks. And the limit varies from one tax break to another. A single person with a Modified Adjusted Gross Income (AGI) above $60,000 will begin to lose some of his student loan interest deduction, and it will phase out entirely when the income reaches $75,000. The numbers for a married couple filing jointly are $125,000 and $155,000 for 2012.

Yes, there is a deduction for savings bond interest that is used to pay for post-secondary classes. But the bond owner must be at least age 24 when the bond is purchased, and be either the sole owner of the bond or own it jointly with a spouse. Most people buy bonds in the name of the child, making the interest on that bond ineligible for the deduction.

You don't have to be working toward a degree to get a tax benefit. The Lifetime Learning Credit is can be used even if you already have a degree. Taking a single class to acquire or improve job skills qualifies; so classes for a graduate degree or a recognized credential. That's why it's called the Lifetime Learning Credit.

Married couples must file jointly in order to claim the American Opportunity Credit, the Lifetime Learning Credit, the Student Loan Interest Deduction, or the Savings Bond Interest Deduction.

If you're under age 59 ½ and you take distributions from an IRA that you use for graduate or undergraduate classes, you can avoid the 10% early distribution penalty – but not the income tax.

Not all of your expenses are eligible. Tuition and fees are qualifying expenses for all of the tax breaks. But the cost of your textbooks won't count for the Savings Bond Interest Deduction or the Lifetime Learning Credit.

To get more details, see my fact sheet on Tax Breaks for Higher Education and IRS Publication 970, Tax Benefits for Education.

I don't know about you, but doing taxes has never been on my top 10 things I like to do! However, I'm all for filing my tax return in an efficient manner that doesn't cost me money. And, many of us now have good choices for filing our returns for free.

E-File Your Form 1040 Series Returns

First, if you file a Form 1040 series, e-filing your tax return (submitting your tax returns electronically) has truly become easy and safe. Regardless of income, everyone can use the free, online Fillable Forms, which are an electronic version of the IRS paper forms.

And, if your income was $57,000 or less in 2011, you can use Free File Tax Software for free tax preparation and e-filing. Instead of being presented with forms to complete, the name brand software will ask you questions and guide you through the process of completing your tax return.

My son and I did his tax return last weekend and completed it in about 30 minutes by using Free File Tax Software. It was painless – quick, easy, and the explanations were clear.

Another advantage of e-file is that you can expect to get your refund in half the time; I know my son appreciates that! For more information about e-file, go to http://www.irs.gov/efile/

Keep in mind that you may also be able to file your Illinois tax return for free, as well as your federal return. Check out e-filing IL taxes.

Do you need help filing your return?

If you are either low-to-moderate income or elderly, there may be free help nearby. Over 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations tax preparation services for low- to moderate-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help generally to people who earn $50,000 and less. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.

To locate the nearest VITA site, taxpayers should call 800-906-9887.

To locate the nearest AARP Tax-Aide site, call 888-227-7669 or visit AARP's website.

Make a Plan for Your Tax Refund

Once you have your tax returns filed, make a plan to use your tax refund wisely. Here are some ideas to consider:

• Pay past due expenses.
• Pay down credit card debt.
• Set aside some of your refund as an emergency fund.
• Save for your child's education.
• Save for a major appliance or other large purchase.
• Boost your retirement funds.
• Pay down a mortgage or save for a down payment on a home.

Consider using IRS Form 8888, Direct Deposit of Refund to More Than One Account, to split your refund among two or three different accounts. This way you can save or invest your refund immediately, and keep some to help with daily living expenses.

• Free subscription to our quarterly American Saver Newsletter
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The stock market has been going gang-busters so far this year. But many people are still shell-shocked from the investment roller coaster of the last decade. Wouldn't it be a relief to have something guaranteed for a change?

Here's one of the few sure things around: if your employer matches your contributions to a 401(k) or 403(b) plan, that's a guaranteed return. Maybe your employer matches 50 cents for every dollar you contribute to your retirement plan, up to some limit such as 3% of your salary. That's no-risk 50% return on those contributions. If the employer matches dollar-for-dollar, that's a 100% return.

That leads us to the first rule to getting the most out of an employer retirement plan: Contribute enough to get all the matching dollars available to you.

If you aren't contributing to your employer plan or you're not contributing enough to get all the matching dollars available, go right now to your employer's benefits website or call your HR department and get that taken care of. If you don't know what investment to choose, you don't have to make that decision. There will be a default option. By law,  that default investment must be "appropriate as a single investment capable of meeting a worker's long-term retirement savings needs" (Department of Labor).