1. Borrow as little as possible. Keep living expenses as low as possible and try not to borrow to fund them. Remember the old saying: If you live like a lawyer when you’re a law student, you’ll have to live like a law student when you’re a lawyer.

2. Check out your future salary, and the earnings records of the graduates of your school, to see how much you can reasonably afford to put toward debt payments when you finish school. Use a loan repayment calculator to estimate how much that means you can afford to borrow now. If there’s a good chance your payments will leave you with very little to live on, or put your debt to income ratio out of whack, rethink your plans by looking for less expensive schools or better financial aid.

3. Look for loans with the lowest interest rates and fees available. Check with your school or charities to see if you qualify for a loan charging no interest at all.

4. Fill out the Free Application for Federal Student Aid to qualify for low-cost federal student loans. Do this before charging tuition on your credit card or signing up for a private loan.

5. Investigate the growing number of loan repayment or forgiveness programs offered by selected graduate schools, employers and professional organizations. While Loan Repayment Assistance Programs, or LRAPs, are fairly common for lawyers doing public service work, there are a growing number for medical professionals, policy grad students, and even M.B.A.’s.

6. Consolidate your federal student loans with the federal government after leaving grad school and apply for Income-Based Repayment. This new program allows debtors to cap monthly payments below 15 percent of their income. Debtors who work in public service and make 120 on-time payments can discharge their remaining debts for free. Those who keep making payments for 25 years can have their remaining debts forgiven no matter what their jobs.

In order to enroll in income-based repayment you have to qualify by demonstrating financial hardship. The good news is that it is not hard to qualify. A borrower is eligible for IBR if the total initial standard monthly payments for Stafford, Grad PLUS and Federal Consolidation Loans in repayment exceed 15% of the borrower’s discretionary income. What is discretionary income? It is the borrower’s adjusted gross income minus the poverty guideline (which is $16,245 this year). The borrower’s initial IBR payment would then be 1/12 of 15% of their discretionary income.

Under the IBR plan a borrower’s financial situation is reassessed every twelve months. The borrower is responsible for submitting their information every year and based on changes in income and family size their payments will increase or decrease accordingly. However, when a person applies for IBR a monthly payment cap is determined and while enrolled in IBR their monthly payment will never exceed this cap. A borrower can also leave IBR at any time, but once again the borrower is responsible for making the phone call to say they want to withdraw.

One of the huge benefits of IBR is that after 25 years of strict monthly payments whatever a borrower has left to pay is forgiven. If a borrower does not have a job right after they graduate, and therefore has an income of zero, they can still enroll in IBR. Fortunately, within the IBR plan a zero-dollar payment counts towards the 300-payment limit and the 120-payment public service loan forgiveness clock.

The key to getting the most out of IBR is discipline and documentation. Borrowers need to have clear proof of their income, family size and marital status. They need to be disciplined enough to submit their information every year in order to avoid having to make their maximum payment. Also if a borrower wants to be eligible for public service loan forgiveness after ten years they need to keep documentation as proof of their work for an eligible organization.

Does this plan sound like a good deal? On Monday check back to see specific IBR situations and learn what the plan might be able to do for you.

Home purchase loan demand fell for a sixth straight week, a trend that does not bode well for the U.S. housing market, which has been showing signs of stabilization after a three-year slump.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications USMGM=ECI, which includes both purchase and refinance loans, decreased 2.5 percent to 611.7 for the week ended Nov. 13.

The hard-hit housing market, a primary driver of the worst U.S. recession since the 1930s, remains highly vulnerable and many are hopeful that the federal government’s intervention will prevent any setbacks.

Ned Redpath, owner/president of Coldwell Banker – Redpath & Co., Realtors in Hanover, New Hampshire, said the recent extension and expansion of the home buyer tax credit is a positive development, but believes it expires too early.

“The cut-off happens too soon and really does not give enough time and space to truly get the market moving, but at least it is something instead of shutting it down now,” he said.

The Obama administration recently extended an $8,000 first-time buyer credit that had been due to expire at the end of this month, added a $6,500 credit for home owners buying a new residence, and increased income limits. Eligible borrowers must sign contracts by April 30 and close loans by June 30.

“I believe we will see an increase in normal sales due to the tax credit and a few more first-time home buyers as well,” Redpath said.

The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.83 percent, down 0.07 percentage point from the previous week, the lowest since mid-May. The rate remained above the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990.

Low interest rates, however, did not impact applications to buy homes, a tentative early indicator of sales. The MBA’s seasonally adjusted purchase index USMGPI=ECI fell 4.7 percent to 210.6, the lowest since November 1997.

The four-week moving average of mortgage applications, which smooths out the volatile weekly figures, was down 1.2 percent.

REFINANCING SLUMPS

The low rates also failed to spark home loan refinancing activity. The Mortgage Bankers seasonally adjusted index of refinancing applications USMGR=ECI decreased 1.4 percent to 2,955.4.

The 30-year fixed-rate mortgage is the most widely used loan and the 5 percent rate level is something of a psychological tipping point, typically sparking home loan refinancing activity.

Fixed 15-year mortgage rates averaged 4.32 percent, down from 4.33 percent the previous week. Rates on one-year ARMs decreased to 6.82 percent from 6.85 percent. (Editing by Leslie Adler)

“Especially in home loans it is important, because HDFC and ICICI Bank were the leaders earlier. Now, SBI is number one. In auto loans it used to be HDFC Bank, in infrastructure finance, there are specialised institutions like IDFC, IIFCL, in SME space there is SIDBI, but everywhere we are number one now,” said Om Prakash Bhatt, chairman of SBI, in an interview to M AIL T ODAY recently.

In the auto loan segment, SBI had gained 44 per cent to Rs 11,594 crore during the 12 months ending September 2009. During the last nine months, SBI entered into tieups with several car manufacturers and their dealers for providing auto finance.

Till recently, HDFC Bank was the leader in disbursing loans in this segment.

HDFC Bank did not respond to an e-mail sent early on Monday. However, Pralay Mondal, retail head of HDFC Bank said auto loan sanctions have seen a revival in October 2009. The bank clocked Rs 1,600 crore of auto loan sanctions during the month, including that of two-wheelers.

In the home loan segment, SBI has seen an annual growth of 23 per cent to Rs 62,338 crore. However, HDFC still has a lead over SBI in the total portfolio of home loans.

“As on September 30, 2009, the loan book stood at Rs 89,519 crore against Rs 81,192 crore in the previous year, an increase of 10 per cent. The corporation sold loans amounting to Rs 6,100 crore during the preceding 12 months. Together with the loans sold, the growth in the loan book would have been higher at 18 per cent,” HDFC said in its latest quarterly results.

ICICI Bank did not respond to an e-mail seeking segment-wise break-up of growth in loans over the last 12 months.

However, its overall loan portfolio has shrunk over 13 per cent in the 12 months ended September 2009, against a 16 per cent growth in the loan book of SBI. After launching the SBI Happy Home scheme in February 2009 with loans at eight per cent for the first year, the monthly average number of home loans sanctioned rose to 22,000 in September from 14,400 in February, the bank said.

Later, SBI has extended this eight per cent loan scheme to the auto, SME and agriculture warehousing sectors.

SBI’s agriculture loan sanctions grew by 21 per cent, with particular thrust on warehousing taking the portfolio to Rs 58,987 crore by September 2009.

In education loans, which are being promoted by the Centre over the last few years, SBI stood first with 42 per cent growth in 12 months at Rs 8,008 crore. The shot in the arm has come from May, 2009, when it brought down the rates, initially beginning at eight per cent.

Credit disbursal of SBI to SMEs was also up by 21 per cent to Rs 95,907 crore. This is one of the priority areas for the Centre, for they provide the largest employment per unit of investment.

SBI’s SME portfolio is bigger than that of SIDBI, which is a nodal agency for SME funding.

SIBDI’s loan book was at Rs 30,073 crore by September 2009.

Growth in corporate loans was at 14 per cent, with total portfolio crossing Rs 1.85 lakh crore by September 2009. Dealogic, a global data provider, had rated SBI as the global leader in five project finance areas for January-September 2009

The country’s largest lender State Bank of India on Friday decided to extend its 8 per cent home loan scheme till March 31, 2010, just a day before it was due to expire. The move is sure to further intensify the already heated competition in the home loan market.

In the past few days banks like Axis Bank and Bank of Rajasthan have launched special scheme for home loan borrowers. Axis Bank came out with a special 8 per cent scheme for the first year and Bank of Rajasthan too dropped home loan rates to 7.5 per cent w.e.f. from November 9 and Punjab National Bank extended its 8.5 per cent scheme till December 31.

The bank, which offers the special scheme under ‘My Home Campaign’, gives 8 per cent fixed interest rate for 5 years for loans up to Rs 5 lakh, with a maximum tenure of 10 years.

These are clear signs of banks renewing focus on the growing home loan market in the country.
With low credit off-take worrying the banking industry, the banks’ continued aggression in the retail space is not surprising especially in the absence of signs of strong demand from the corporates.

Credit off-take dropped to single digits recording 9.6 per cent growth as on October 23. In fact, both the disappointing credit growth numbers and SBI’s move has already got other players thinking of extending their schemes too.
“Such schemes should be continued as it is not a time to withdraw schemes,” said MV Nair, chairman and MD of Union Bank of India.

SBI’s aggression may also force bigger private sector players to relook at their strategy for the fear of losing market share. The customers however are all smiles as the party continues.