1 Sign up for the income-based repayment plan. For borrowers with high debt relative to income, monthly payments are reduced, and any remaining debt is forgiven after 25 years. The Obama administration has proposed shortening the time frame to 20 years.

2 Work in a public-service job. Any remaining debt will be forgiven after you have worked full-time in public service for ten years and made 120 payments, beginning on or after October 1, 2007. You benefit only if your payments have been reduced through an income-linked repayment plan. Student loans must be made through the federal Direct Loan program — as opposed to private lenders, such as Sallie Mae — but you can get around this restriction by consolidating your loans into the Direct Loan program. For details on both income-based repayment and public-service loan forgiveness go to www.ibrinfo.org

3 Work in an underserved area. If you enter a profession such as teaching, health services, social work or clinical research, you could qualify for loan forgiveness through one of several programs. But before you make a years-long commitment, be sure the program has the resources to make good on its promise.

4 Work at a national service organization. A stint in AmeriCorps or its member organizations, including Vista, makes you eligible to receive a Segal AmeriCorps Education Award, worth up to $5,350 in 2010. You can use the award to pay for further education or to repay your student loans. The Peace Corps also rewards you for service by canceling up to 70% of federal Perkins loans.

For more information, go to www.finaid.org/loans/forgiveness.phtml.

Dear John,
I think your first step is to review the loan documents. Sallie Mae didn’t dream this stuff up. They’re contacting you for a reason. If you don’t have ready access to the loan documents, I’d suggest contacting the Office of the Consumer Advocate at Sallie Mae.

Without specifically referencing you, I discussed the issues surrounding the loan with Patricia Christel, a spokeswoman at Sallie Mae. Her assistance was invaluable in helping me to frame this reply.

In the loan application process for a Sallie Mae student loan, the student and the co-signer are asked to sign the loan application and promissory note, and both receive “truth in lending” disclosure statements required by law. The promissory note clearly states that the primary borrower and the co-signer are jointly liable to pay back the loan. That means both are equally obligated, whether on their own or together. While the application process is relatively straightforward, it does require time and a thoughtful effort by the student and the co-signer. For this reason, a typical co-signer is very well aware of his or her obligation.

A co-signer is alerted as soon as a primary borrower is late on a payment. Sallie Mae also reaches out to the co-signer immediately if it is unable to locate the primary borrower. Sallie Mae, in some of its newer loan programs, sends the co-signer a monthly statement as a matter of course. This courtesy is actually a nice feature because the co-signer can determine if the primary borrower is making loan payments.

You say that Sallie Mae hasn’t tried to collect from your son. Does that mean that he hasn’t been receiving monthly bills? Do they have his current address?

If you want your son to pay and he’s not paying because he doesn’t have the money, he could explore options to request a reduced payment plan or to put the loan in forbearance. A forbearance is an agreement between the lender and the student that suspends payments for up to a year.

These options aren’t free; they’ll increase the interest expense. But if you want your son to repay his student loan without you contributing as co-signer, they can give him some breathing room.

Talk to your son about the student loan. Consider setting up automatic loan payments. Barring any act of forgery, you’re responsible as well, so consider having the automatic loan payments coming out of your account and have your son make his loan payments to you.

Keeping both of your credit histories as clean as possible is important. As a co-signer, you are equally responsible for this student loan. Standing on principle is going to cost you principal, because it’s your debt, too.

What spooked investors? Standard & Poor’s (S&P) downgraded the US debt outlook from stable to negative.

The reasoning behind the S&P’s downgrade is the growing debt crisis in America. As The Wall Street Journal reports, the US deficit is expected to grow from $1.5 trillion to $1.65 trillion this year and now comprises 10 percent of total US economic output.

The rating firm cited the budget gridlock and lack of faith in the government’s ability to reach a deal to substantially lower the deficit as reasons for the downgrade, “The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term challenges will persist until at least after the national elections in 2012.”

Currently, the US is the only one of 19 countries to have a negative outlook for their debt while enjoying an AAA rating. This move is substantial, and while the US still retains its AAA rating, over 50 percent of countries that S&P downgrade to negative eventually lose their AAA credit rating.

For years now, I’ve been writing about the dangers of the growing US deficit. And I’ve blogged here in a post, entitled “The Showdown”, about what’s at stake in the stalemate between the Democratically-controlled White House and the Republican-controlled House of Representatives.

In that post, I wrote:

Two important dates are coming up in this showdown. In early March, a stopgap-spending bill that’s funded the government expires. If that bill isn’t extended, the result will be a government shutdown. And in May, the government will hit its statutory limit on government spending, the debt ceiling. The Republicans are planning on using the showdown in May to push for deep spending cuts. The result will be a potentially epic showdown that will pave the economic road of the US for years to come.

Noticeably absent from these budgetary discussions is any mention of Social Security and Medicare, which together along with other entitlement programs make up 60 percent of all Federal spending and are expected to grow to 68 percent of all Federal spending by 2021. Overall, it’s estimated that costs for Social Security will grow by 71 percent, Medicare will grow by 72 percent, and Medicaid will grow by 115 percent over the next decade. These programs, if eliminated, would wipeout the Federal deficit.

Of course, no politician will touch Social Security and Medicare because while they understand people want to complain about the deficit, they also know that no one wants to pay the price of the tough decisions it would take to tame our budget. According to a survey from the Pew Research Center this month, only 12 percent of Americans supported spending cuts on Social Security and Medicare. Touching those programs is political suicide.

Nothing has changed since I wrote that a couple months ago, and today’s move by the S&P confirms my belief that the US government will be hard-pressed to actually put a real dent in our ever-expanding debt—and further proof that the recent budget deal is a Band-Aid on a wound that needs stitches.

The usual timeframe between a country’s debt outlook being downgraded to negative and their credit rating being downgraded from AAA by S&P is around six months to a year. That means that you must be vigilant.

In the coming months, the ability or inability of the US government to get the financial house in order will determine the fate of many people’s fortunes. If the US credit rating is downgraded from AAA, the result will be catastrophic for the economy. Most likely, stocks, bonds, and mutual funds would tumble; and commodities like gold and silver would skyrocket. Additionally, borrowing costs for both the US and the US consumer would climb sharply, causing another housing crisis.

And millions of baby boomers who rely on the stock market, mutual funds, government bonds, and their house for their retirement would be wiped out.

These are interesting times to live. As I’ve said before, we are in the middle of the biggest wealth transfer in history, and it appears it may get bigger. Only the financially intelligent—those who know how to make money in up and down markets—will thrive and grow rich.

I encourage you to continue to watch the financial news closely and to continue your financial education.

Inflation is actually one of the biggest reasons large corporations are so powerful in society. The government and big banks use inflation to force people to spend their money and go into as much debt as they can afford.

But how does it all work? Before we answer that, let’s first look at a parable. Some things are best learned in a story format, and inflation is one of those.

The Saver and the Slave: An Inflation Story

There were once two men who were neighbors. Their names were “Jack” and “John”.

Jack was a saver. He spent his entire life saving every penny he could get his hands on. He saved money with coupons, saved money by buying stuff only in off-seasons, saved money by spending as little as he could, etc. He was a saver. By the time he was 45, he had saved exactly $100,000.

John was a spender. He spent every dime he ever earned. Back in his 20s, he even took out a $100,000 loan, and bought two houses with it. He never used coupons, never looked at prices before buying anything, and wore nicer clothes.

During this time, inflation started to hit in. Inflation was fairly high. By the time Jack and John were 45, inflation destroyed 90% of the value of the US dollar.

For Jack, this was disastrous. He spent his whole life saving $100,000, and suddenly it was worth only 10% of what it should have been worth. This means that rather than having 100k it was as though he only had 10k. Not enough to even buy a house.

For John, this was perfect. He spent his whole life spending his money, so he didn’t see his money lose value. He took out a 100k loan, but his loan was only like he had a 10k loan now — and he still has two houses. John ended up selling one house, paying off the loan, and walking away with a free house, and 90k.

Inflation Destroys Debt and Dollars

Inflation doesn’t destroy wealth — inflation destroys dollars. This means if you’re in debt, inflation makes your debt less and less. If inflation is 10%, it’s like your debt is getting 10% smaller every year. If you’re a saver, inflation makes your savings 10% smaller every year.

Every year people in debt see their net worth increase because of inflation.

Every year people who are savers see their net worth decrease because of inflation.

Inflation doesn’t hurt everyone equally — it just hurts people with cash, and forces them to spend their money and get into debt. Inflation essentially forces people to become slaves to banks and to not have money.

In an inflationary society, people who are willing to go into debt to buy houses, businesses and such are at a huge, huge advantage over people who just save their money. Savers are penalized. Spenders are rewarded.

What This Really Means

Because inflation makes debt more attractive, an economy with inflation will see a much higher level of debt than societies with less inflation. This leads to the economy becoming much less secure, and sets us up for financial catastrophe.

Inflation is one of the reasons so many people purchase houses and property even before they have the money — inflation makes cash less profitable or secure.

There’s a reason the government and large banks support creating inflation. It pushes individuals into debt. It makes consumers slaves to creditors. It transfers wealth from savers to people in debt. It stops frugal people from being able to make ends meet unless they have large incomes.

This all means several things:

a) Investing makes more sense. Savings accounts don’t pay interest that’s higher than inflation. This means that most people will use the stock market to build up wealth over time — they have to take part in the financial system. Plenty will get fleeced in the system. Big financial institutions make more money this way.

b) Debt makes more sense. This should be obvious. You’re using inflation to essentially get free money. Most debt comes from banks, meaning you’ll be a voluntary debt slave to a bank because it’s profitable to become one. You’re shackled to the system.

c) An independent retirement is difficult. Being able to save your own money for retirement is much, much more difficult with inflation. If it wasn’t for inflation, social security would be much less likely to exist. This means inflation makes the people more dependent on the government. The establishment loves this.

If you save $1,000,000 for retirement over the course of 50 years, and inflation is 4.07%… you actually only save $136,000 in today’s money, which probably won’t be enough to own a nice house.

Does this mean you shouldn’t save? Does this mean you should go into debt? Not quite. I’ll be writing what you should do in the future… hint: gold is a great inflation hedge.

Right now, inflation is skyrocketing. Gold is exploding. Silver is exploding. The dollar is dying. This is all happening in a way that is destroying savers, rewarding debt, and creating an economy that is based on debt and insecurity.

Shaun Connell is the the founder and editor of Stand Strong Research. He’s an entrepreneur and investor living in rural America. He’s also a firm believer in income investing, inflation hedging, and debt-free living.

As The New York Times article states: “The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.”

The problem is that wealth wasn’t generated. Only debt. People didn’t sell their homes to pay for things like college educations and vacations; they borrowed against them. In the process they bought into the illusion that they were tapping an asset when in reality they were growing a liability by taking on more and more bad debt.

It’s amazing to me that people still think their house will gain value given the true statistics about the housing market. The reality is that the housing market will take decades to regain value—and may fall in value in the short term—and most gains will only be keeping up with inflation. Buying a home and counting on it to be your retirement is financial ignorance and recklessness at its worst.

How a house can be an asset

Despite the fact that housing prices may never actually recover in real terms, I’m buying. This may sound contradictory, but it’s not. As you may have guessed, I’m buying investment properties that cash flow.

To me it only matters if a little property appreciates in price. I care only whether it provides cash flow every month. And while investing for cash flow won’t provide the home-run returns that speculators saw in the early 2000′s, it’s the only sure way to build wealth and assure a secure retirement in terms of real estate investing.

For many, the fact that housing prices might drop again is a bad thing. For me it is exciting. It means that more deals will be out there for great properties that bring in money every month in the form of rent. As I’ve said before, we’re experiencing the greatest wealth transfer in history. If you’re smart with your money, wise in your looking for deals, and ready to make a move, you can find great investments at bargain prices.

The key is to make your money on the buy, not the sell. What I mean by that is that by doing proper due diligence you can find deals that will provide substantial cash flow for years to come. By doing so you don’t have to worry about the price of your asset. If it goes up, that’s a bonus. If it doesn’t, you still have a great property that puts money in your pocket every month.

Your house is not an asset. But a house can be an asset—if it cash flows.

It seems like everyone, from blue-chip execs to members of congress, is throwing around words like million, billion and trillion without any comprehension of what they really represent. CNN even goes so far as to call trillion “the new billion.”

Why is it so hard to wrap your head around these big numbers? K.C. Cole, a commentator for American Public Media’s Marketplace says it’s just the way we’re wired. According to Cole, “We automatically ‘read’ a billion as about a third of a trillion. After all, it’s only three zeros off. But of course, a trillion is a thousand times a billion, and a thousand is a lot.”

What Cole is saying may surprise you. A thousand doesn’t seem like such a big number — most people have at least $1,000 in their bank account. But divide your $200,000 salary by a factor of a thousand, and you’ll find yourself scraping by on only $200 a year. Increase the size of a classroom by the same amount, and your 15 students are suddenly a mob of 15,000. The distinction is roughly the difference between a million and a billion.

So how do you visualize a trillion? Creative people are coming up with new and better ways all the time.

According to the MegaPenny Project, a trillion pennies stacked together would be somewhere between the Washington Monument and the Empire State Building.

Here are our five favorite ways to put this colossal number into context.

1) A Trillion Seconds Worth a Distance Run
Can you guess how many days it takes for a trillion seconds to pass? If you said, “Let me go get my calculator,” you’re on the right track. I’ll give you a hint: Each 24-hour day is worth 86,400 seconds. That’s a huge number! But it’s no where near a trillion.

• A million seconds is 13 days.
• A billion seconds is 31 years.
• A trillion seconds is 31,688 years.

If you can believe it, a trillion seconds ago, modern humans were yet to exist, and Neanderthals stalked the plains of Europe.

2) Astronomically Large
Outside on a clear night, you can see about two thousand stars with the naked eye, according to the astronomy site A Bright Spot Opposite the Sun. With $1 trillion, you could buy all of those stars if each cost $500 million.

3) Oh the Places They Will Go
A brand new Porsche 911 is a pretty luxurious purchase. Only the truly wealthy can afford to plunk down $88,800 on a car that fits two people and a weekend bag. But with a trillion dollars, in addition to a diploma you could give a set of keys to every graduating high school student in the country — for the next four years!

4) The 50 Richest People in the Room
Bill Gates, Warren Buffett, the entire Walton family — these are just a few of the names that top Forbes’ annual report on the richest people in the world. Yet none of them will ever be worth a trillion dollars. In fact, if you put the 50 richest billionaires in a room, their combined net worth would barely pass $1 trillion.

5) Not Even the Biggest Blue-Chips
Let’s go back to how much purchasing power $1 trillion will give you. For that amount of money, you could buy every share of ExxonMobil (NYSE: XOM) — and still have more than $700 billion to spend buying up every share of…

• Apple (Nasdaq: AAPL) — $233.10 billion
• Microsoft (Nasdaq: MSFT) — $204.29 billion
• Berkshire Hathaway (NYSE: BRK-A) — $197.89 billion
• Wal-Mart (NYSE: WMT) — $181.40 billion

Now multiply by 13. Can you wrap your brain around that?

Most of my businesses had break even or positive cash flow monthly. I paid to join the Kiyosaki Rich Dad education program so I could go to the next level with my money smart skills. This course put me back into credit card debt but I felt the Rich Dad education would be worth every penny.

Well, how quickly things can change. Within 2 weeks of starting the Kiyosaki Rich Dad education program my tax bill came in twice what I expected, the timing belt broke on my diesel Jetta, destroying a perfectly good engine.

Suddenly my positive cash flow monthly was significantly negative. I was reeling from these events, but the final straw came when my property manager called and told me my renters had skipped. My only rental property has already been a challenge because of the economy and losing the renters may cost me the house.

So, how did I handle these setbacks? I cried. Yep, it took me 24 hours to digest this last blow and then I had a major meltdown. Unfortunately, my good friend and business partner took the brunt of it through absolutely no fault of her own. She handled it well. Everyone should be blessed with such a good friend.

Crying let off some pressure but did not make the problems go away. The saving grace is that I have been in this place before and I know this too shall pass.

My plan to regroup looks like this:

1. Pray – Not for God to rescue me from my mistakes, but for Him to guide, support and love me through the process of dealing with the fallout.

2. Cut every expense possible – I will sell my car after it is repaired. This will give me a small amount of cash and save on insurance. I do have my 1 ton truck to drive. I have cut my direct TV to absolute minimum and there will be no eating out for a while. While these steps will not get my cash flow monthly positive, every dollar counts.

3. Increase cash flow monthly – Having several businesses allows me to increase my efforts when I get in financial trouble. I have to resist taking on more veterinary clients because this work will take me away from my efforts to increase my cash flow monthly.

This concept was one of the most difficult ones for me to grasp in my Kiyosaki Rich Dad education. Working harder on my S quadrant self employment job will not increase my long term cash flow monthly. No more casual business building with my Xango networking.

Many or the most successful leaders in the company came into the business with severe financial challenges. I will have to get busy and work harder and in a money smart fashion.

4. Seek help from professionals – I plan to take full advantage of my Kiyosaki Rich Dad education coaches to help me figure out how to handle my rental property. It is hard to admit all the mistakes I made when I bought this property but now I know.

For many this kind of roller coaster financial ride may be too uncomfortable but for me I see it as a learning process. I have made many financial mistakes but each mistake has eventually brought me closer to my goal of having my cash flow monthly higher than my expenses.

Until I get my cash flow monthly where it needs to be I will still struggle with finances. The Kiyosaki Rich Dad education program has helped me understand this

1. Medical Expenses

A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.

Rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.

2. Job Loss

Whether due to layoff, termination or resignation, the loss of income from a job can be equally devastating. Some are lucky enough to receive severance packages, but many find pink slips on their desks or lockers with little or no prior notice. Not having an emergency fund to draw from only worsens this situation, and using credit cards to pay bills can be disastrous.

The loss of insurance coverage and the cost of COBRA insurance also drain the job seeker’s already limited resources. Those who are unable to find similar gainful employment for an extended period of time may not be able to recover from the lack of income in time to keep the creditors at bay.

3. Poor/Excess Use of Credit

Some people simply can’t control their spending. Credit card bills, installment debt, car and other loan payments can eventually spiral out of control, until finally the borrower is unable to make even the minimum payment on each type of debt. If the borrower cannot access funds from friends or family or otherwise obtain a debt-consolidation loan, then bankruptcy is usually the inevitable alternative.

Statistics indicate that most debt-consolidation plans fail for various reasons, and usually only delay filing for most participants. Although home-equity loans can be a good remedy for unsecured debt in some cases, once it is exhausted, irresponsible borrowers can face foreclosure on their homes if they are unable to make this payment as well.

4. Divorce/Separation

Marital dissolutions create tremendous financial strain on both partners in several ways. First come the legal fees, which can be astronomical in some cases, followed by a division of marital assets, decree of child support and/or alimony, and finally the ongoing cost of keeping up two separate households after the split. The legal costs alone are enough to force some to file, while wage garnishments to cover back child support or alimony can strip others of the ability to pay the rest of their bills. Spouses who fail to pay the support dictated in the agreement often leave the other completely destitute.

5. Unexpected Expenses

Loss of property due to theft or casualty, such as earthquakes, floods or tornadoes for which the owner is not insured can force some into bankruptcy. Many homeowners are likely unaware that they must take out separate coverage for certain events such as earthquakes. Those who do not have coverage for this type of peril can face the loss of not only their homes but most or all of their possessions as well. Not only must they then pay to replace these items, but they must also find immediate food and shelter in the meantime. Furthermore, those who lose their wardrobes in such a catastrophe may not be able to dress appropriately for their work, which could cost them their jobs.

The Bottom Line

There are many reasons why taxpayers are forced-or choose-to declare bankruptcy. But many times, common sense, sound financial planning and preparation for the future can head off this problem before it becomes inevitable. Those who are contemplating this possibility should seek a credit counselor or financial planner before choosing this alternative.

There are several different places that offer payday loans. It works somewhat like a cash advance only it comes through a different business rather than through your employer. These are specialized businesses set up to give you loans based on the fact that you are going to receive another pay check.

Some are based on the Internet, others are businesses that you walk in to and do business with face to face. The money that they offer can be used anywhere from one to four weeks.

These companies may seem like an easy way to get rid of a bounced check, avoid a late payment, or even help yourself out of a bad credit situation. Many of them will even give you a loan if you have bad credit, no credit at all, or even if you have claimed bankruptcy. As long as you have an income and can prove it they will likely give you a short-term loan.

The biggest problem with these loans is that they have a very high interest rate. Their excuse is that it is because you are borrowing the money for a very short time. The average rate of these loans is usually 300% APR. Because of this you will actually end up owing more in interest than what you borrowed in the first place. Many people will end up having to extend the loan, which will cause them to go more in to debt than they were when they went to the loan company.

When you go to the loan company to get the loan you show them proof of employment and then write them a postdated check for the amount that you are borrowing plus a fee. This fee is a lender fee but it does not include the interest rate. The fee really isn’t that high but the interest rate will be. If you don’t pay the interest rate the loan company will begin calling you or your place of employment to collect on the outstanding money owed.

If you need money and need it fast there are much better ways to go about it. This way may very well get you in a bind later on. The first way is to get a credit union loan. Many credit unions offer small loans much the same way as the payday loan companies do. There is one big difference though, the credit union loans will only charge about 15% APR as compared to 300% of the short-term payday loan companies.

This, of course, makes them at least possible to pay off, unlike the short-term payday loan. If you all ready have an account with the credit union you have the option to borrow from your own account. If you do this you have an even lower APR rate. You even earn dividends back on your savings when you pay back the loan if you do it this way.

Another way to avoid going to a payday loan company is by using a credit card advance. This means taking money out of your credit card and paying it back later. The APR is a little higher than with the credit union solution but still much less than with the payday loan company. The interest rate here would be about 20-25%.

This option is something that you probably only want to do if you have a good credit score so that you don’t make your credit score look bad. Especially if you think that you might not be able to pay it all back by your next payday.

You can also avoid going to payday loan companies by using resources that are all ready available to you. Many banks have overdraft protection available to their patrons. This means that if you write a check without funds in the checking account the bank will give you an automatic loan for the amount of the check to cover it. Then you pay back this loan over time.

It may also be just as effective to talk to the people where you owe the money. They may be very willing to cut you some slack and take partial payments on what you owe or give you a grace period. Many places can be very flexible.

While payday lenders can be a very convenient way to get money the huge interest rate and the automatic permission that you give them to contact you and your employer when you sign the papers for the loan. This is an instance where the end may not justify the means.