Newly minted grads face loan loads

To the Class of 2011:

There are a few things you should know before you embrace the challenge of making a living based on everything thing you've learned (or were supposed to have learned) over the past four (or five, or six) years.

You've completed a college education that cost considerably more than what your parents, if they were fortunate enough to attend college, paid for theirs. Moreover, in all likelihood, you (and they) borrowed considerable sums of money for this privilege.

The Class of 2009 left college with an average debt of $24,000, up 6 percent from the previous year, according to The Project on Student Debt. Those are the latest figures available. Given that tuition and fees rose anywhere from 4 to 8 percent in your senior year, according to the College Board, there's a good chance the Class of 2011 will have more debt than the Class of 2009.

Your reward is a lousy job market. Some of you already know that after coming up empty on the interview circuit. Last year, the unemployment rate for college graduates younger than 25 years old was 9.3 percent vs. 5.4 percent in 2007, according to the Economic Policy Institute.

Whether you have a job or not, payments on your student loans soon will be due. You will be informed in a number of ways and at a number of times what your monthly payments are and when you must start making them.

If you borrowed the $24,000 that the Class of 2009 averaged, your monthly payments may be in the neighborhood of $275 a month. The amount will vary from student to student based on what types of loans you took out. Federal student loans carry lower interest rates than private loans.

Consider that $275 a month in light of what will come out of your paycheck for rent, food, clothing, entertainment, credit card payments and other expenses. Also consider that making your student loan payments on time will improve your credit score, making it easier to buy a car or home (assuming you eventually leave home).

Whatever your monthly student loan bill is, do not ignore repayment notices. Doing so could increase your costs and jeopardize your credit rating. Yes, the notices can be confusing. You may have to make a toll-free call or two to clear things up or go online to handle some of the details. Take care of it. This is your problem, not your parents'.

If your loan payments won't start until six months after you graduate, start setting aside money now to make them. Consider having them automatically deducted from your bank account. Many lenders will reduce the interest rate by 0.25 percentage points for automatic electronic payments. There are other discounts available, including one for making a certain number of on-time payments.

As hard as you try, some of you won't be able to make your monthly payments. The latest figures from the U.S. Department of Education indicate that nearly 14 percent of student loan borrowers default within three years of making their first loan payment.

The average is skewed by the 25 percent default rate for borrowers who attended "for-profit" colleges that offer programs in auto mechanics, criminal justice, medical technology and other fields. The default rate was much lower for students who attended public schools (10.8 percent) or private nonprofit schools (7.6 percent).

There is help available. A 2007 federal law lowers monthly payments for eligible federal student loan borrowers based on their income and debt load.

If you think you won't be able to make a payment, contact the lender. The sooner you act, the less dire the consequences may be.

Fortunately, there is a wealth of Web-based information on student loans. Divert your attention from YouTube, Facebook and other distractions long enough to learn something at these websites:

• www.nslds.ed.gov. This U.S. Department of Education site lets you access information on your federal student loans: how much you've borrowed; how much you've repaid; and whether payments are being credited to your account.

• www.ombudsman.ed.gov. The Web page for DOE's Federal Student Aid Ombudsman provides information on debt relief, consolidating loans and other topics.

• www.ibrinfo.org. Sponsored by the Project on Student Debt, this website will fill you in on the Income-Based Repayment program for eligible low-income borrowers with federal student loans. It also will help you determine whether you qualify for the Public Service Loan Forgiveness program, which allows graduates who work in education, law enforcement and other public service fields to have a portion of their debt forgiven.

• www.studentloanborrowerassistance.org. Information on repayment options, where to go for help and other topics provided by the National Consumer Law Center.

• www.finaid.org. Graduates will find information on repayment terms, discounts, loan consolidation and other subjects. This website, organized by Cranberry education consultant Mark Kantrowitz, is even better for parents and students who are preparing for the expense of a college education because it provides a wealth of tips on getting scholarships and other forms of financial aid.