Personal Finance: New grads can relieve some debt

It's a tough time to be leaving college.

Many new graduates don't have a job, find employers aren't particularly eager to see them, and have mounds of debt. Students who borrow leave school with an average of $20,000 in loans.

There's no getting around the jobs picture. With the economy's downturn, fewer employers are hiring people fresh out of school than they did in 2009, according to a survey by the Society for Human Resource Management.

But if you're a new graduate with federal student loans - called Stafford or Perkins loans - that part might not be as bad as you think. You have 10 years to pay, and may be able to delay payments if the job market remains cruel.

Breathing room. The government gives people with Stafford or Perkins loans - which are friendlier than private loans - six months to get their feet on the ground before starting payments.

Make sure you know what loans you have by using the National Student Loan Data System, at nslds.ed.gov. Meanwhile, pay attention to any private loans, which might need attention immediately. If the six-month grace period passes on federal loans and you are still pressed financially, you will have options only if you respond fast. Call your lenders, explain the job issues, and ask for temporary payment relief or a payment plan.

Deferment or forbearance. You can get relief for up to three years, but you must show lenders proof on such issues as a job loss, active military service, or attending graduate school. If you have a subsidized Stafford loan, the government will pay loan interest while you delay payments.

If you have an unsubsidized loan, you can delay payments, but they will add costs to your future. At 6 percent interest, a $40,000 loan after a three-year delay could be more than $47,600, notes the book: Graduation Debt: How to Manage Student Loans and Live Your Life, by Reyna Gobel.

Remember to request "deferment" or "forbearance" from lenders. Obtain information at http://tinyurl.com/3s3w6d.

Income-based repayment plan. If paychecks do not cover living expenses and student loans, you can get smaller payments based on income and family size. In the future - as your job or a marriage improves your situation - you will be required to pay what you could not earlier. If your income stays low, loan payments can be canceled after 25 years.

Good deeds rewarded. If you serve the public - perhaps through a career in education, health care, libraries, the military, social work, or police work - you might be able to use the public-service loan-forgiveness program to have your debt canceled after 10 years, said Mark Kantrowitz, founder of website FinAid.

Find rules at http://go.philly.com/FinAid

Difficult lender. Public-service forgiveness and other provisions might apply only to loans through the government's Direct Loan Program. If your loans are outside that program, consider moving them into it by consolidating, Kantrowitz said. See http://tinyurl.com/c2p7nu Consolidating variable-interest-rate loans that predated 2006 could reduce rates.

Don't ignore loans. Missing payments without your lender's blessing is considered a default, and that carries consequences. If you want new federal student loans for future schooling or need a transcript, you could be refused.

Defaults damage your credit score, which could keep you from getting an apartment, a job, or a credit card and add thousands of dollars to the cost of buying a car or home.