Waiting tables and working summers for a surveying firm gave David Hilmer a nice nest egg for college at the University of Wisconsin, Madison. Although the money he saved was a good start, it was not enough. "After about a year and a half, I was scrambling--thinking how I was going to cover my dorm expenses and tuition," he recalls. Now working as the director of business development at Little Tornadoes, an Internet consulting firm in New York City, Hilmer looks back and says that student loans (a federal Perkins, Stafford, and a university loan) enabled him to graduate.

With the high cost of a college education today, it is no wonder students are relying more on loans than ever before to help them make ends meet, according to the College Board. The good news is that interest rates are currently at record lows of less than 3 percent on the Stafford.

To make smart decisions about borrowing, you still need to plan ahead now and understand your options when it comes time for repayment. Here are some simple guidelines that apply to the major federal loan programs--the Perkins, the Stafford, the PLUS--as well as independent bank loans. (For more specifics on programs

To get some idea of how much is too much, you need to estimate how much you'll be able to pay back once you graduate. That involves estimating your future salary and expenses.

The best way to do this is to use a budgeting calculator available on the Web site of a major lender, such as Bank of America (www.bankof america.com/studentbanking) or Chela (www.loans4students.org). Calculators let you estimate monthly expenses--rent, utilities, food, clothes, car payments, insurance, etc. Then you compare those expenses to your estimated salary. Some calculators provide salary info, or you can find Bureau of Labor Statistics salary averages at www.bls.gov/oco/home.htm. By subtracting your estimated expenses from your estimated salary, you can predict how much you can afford in monthly loan payments.

AVOID DEFAULT AT ALL COSTS

If you do wind up borrowing more than you can afford, you run the risk of defaulting, or failing to pay back your loan according to agreed-upon terms. These terms are specified in a promissory note, a legal document that binds you to make regular payments.

Default usually results after you miss payments for 180 days. Many defaulted loans are sent to collection agencies that may charge costly late fees and take money from your wages. Worst of all, a defaulted loan can haunt you later because it will be recorded as part of your credit history for seven years. Lenders refer to your credit history when you apply for any major loan.

"Credit bureaus keep close tabs on delinquencies," says Tom Lustig, vice president and director of marketing at PNC Bank. If lenders see you have a defaulted loan, they may deny you a mortgage, car loan, credit card, or personal loan, or charge a higher interest rate.

Most lenders provide students with charts to help track repayments. Keep in mind: If you can't make a monthly installment, immediately contact your lender or servicer (the company that owns your loan) to discuss the problem. Plus paying on time has further advantages--many lenders will give about a 1 percent discount to students who make

UNDERSTANDING THE TERMS

Knowing the terms of your loan--the conditions by which you have borrowed and are obligated to repay the money--can help you avoid default. But first you should start by understanding some basic loan terms:

Grace period. A period of time--usually lasting six months after you leave college--when many student loans don't require repayment. After the grace period, a deferment or forbearance can temporarily suspend repayment.

Deferment. A period when a borrower who meets certain criteria may temporarily stop loan payments. Depending on your type of loan, the federal government may pay the interest on it during your deferment period. New borrowers might be eligible for a deferment if they are still enrolled in school half-time or full-time; unemployed; studying in an approved graduate fellowship or rehabilitation program for the disabled; or experiencing economic hardship.

Forbearance. The temporary suspension of repayment in cases of hardship. Anyone with student loans may claim forbearance for six months at a time, for up to a total of three years, but interest still accrues.