From my undergraduate degree, I only have $500 left on my student loan balances. Should I pay them off or continue making payments as I will have a high percentage paid on an open loan?

My goals are to improve my credit and also continue graduate studies. I have not applied yet for student loans thought maybe the lender would be more inclined if I had a satisfactorily paid account or a paid in full account.

Are you looking at government loans (which I would definitely do first)? If so, they are not credit-based, so it doesn't matter what your scores are. What was your original balance on your loans? With that little of an amount left (even at $50/mo, you'll have them paid off in less than a year), I doubt that it would make too much of a difference one way or another. It really depends on what else is on your report. You may want to post that part of your question on the Credit Forum where there's a lot more experience about effects different things have on your scores.

I would first look at Direct or FFEL loans. As I said, they aren't credit based, so you don't have to worry about your scores, as long as you're not currently in default on any other student loans (which it doesn't sound like is the case with you). They also tend to have better repayment terms (i.e., much more flexible) and VERY good interest rates; depending on your current financial situation, you may even qualify for subsidized loans where no interest accrues while you're in school. Even if you can't get enough to cover everything this way (there are maximum loan limits on these), they're usually the way to start. I would also advise meeting with your school's financial aid office. They'll have a lot more information on other types of financing and may even have information on scholarships or grants that you don't even know about -- and, more importantly, don't have to pay back!

Good luck!!