Government programs helping with rising cost of college

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PHOENIX - For the first time in years there is some good news for college students who borrow to pay for their education.

The federal program is complex and won't apply to everyone looking to borrow money for school, but it Samantha King is excited about going to ASU this fall.

But the money her parents set aside for her college education won't nearly be enough. They had to take out a loan $19,000 just to get Samantha started.

"We thought we were prepared for her to go to college but after the past year we lost substantial amount of money because of the 401k drop," said Samantha's dad Steve King said.

It's the same story all over ASU, the desire to go to college combined with deep concern about how long it will take to pay the loans back.

"I'm really worried the economy is not good and i don't know if there are jobs available when I graduate and everything," Elizabeth Guitierrez said

But a new government program aims to alleviate concerns and help families, like the Kings, get through these tough financial times.

The program called the income based repayment plan, seeks to cap monthly payments at an amount considered affordable based on income and family size.

"This allows you to stretch out your loan to 25 years? Yes," certified financial planner Michelle Evard said.

Certified financial planner Michelle Evard explains another big part of the plan.

"If you make payments for 10 years, if you are working in social services for the government in some way shape or form in 10 yrs your loan will be forgiven."

So as the price of tuition continues to rise the hope is with this new program the punches will sting a little less.

"I think it's a huge deal because you are encouraging people to go to school and make it affordable when they get out to pay for it," Evard said.

Also on Wednesday, the interest rate on new Federal Stafford Loans, the most widely used federally guaranteed student loan, will drop to 5.6 percent, from 6 percent. By 2012, the rate will fall to 3.4 percent, under mandated by Congress. For a income based repayment calculator, .

If you have questions you can contact Michelle Evard, CFP, or 602.687.0745.

Here are some tips from Evard:

Many people wonder if they're doing enough, saving enough or simply on the right track with their finances. Below are some basics that everyone should be doing. Once you accomplish these tasks with your finances, it may be a good idea to have an advisor review your portfolio. It doesn't take a lot of time, especially for the peace of mind you will get from squaring away your financial life.

1. Save monthly in an emergency savings account. Do what you can, but make it automatic. An emergency savings account will help you stay away from using a credit card when an unexpected expense pops up.

2. Save monthly for retirement. A general rule of thumb is to save 10% of your gross (before tax) earnings for retirement. If you make $40,000, save $4,000/yr for retirement. Save 15% of your gross income if you want a GREAT retirement.

3. Review your home and auto insurance coverage with your agent. With home prices moving up and down, it is important to know if you are covered when your house burns down or if you have towing included in your coverage. To save money, it may be beneficial to make your deductible $500 or higher.

4. Pick a weekly allowance and withdraw it weekly from your bank in cash. Using cash instead of credit will let you know exactly where you stand at all times. If you have $50 left on Wednesday and you are going out to dinner on Friday, stopping by the mall to shop will be out of the question. Or you may decide to shop instead of going out Friday. Either way, you are in control of how and when you spend your money - and if you can afford it. No more charging away and "hoping" there is money to pay the bill.

5. Cut your budget any way you can if times are tight - gym, cable, pool guy, get a roommate - there are many things you can do to save money, but remember to not completely starve yourself if you can help it. It's ok to spend money on one enjoyable splurge, just not 3 or 4.

That's it! Doing these simple little steps will take you a long way in your financial life. Once your retirement accounts reach $20-25k, visit a financial planner to reallocate and help you with your next steps. You can do the beginning steps easily on your own (and for free!).