By Michelle Singletary
Saturday, May 19, 2007; F01

As college graduation season comes to a close, the newly anointed degree-holders will have to face a new reality -- life with hefty education debt.

By the time they graduate, about two-thirds of students at four-year colleges and universities have accumulated student loan debt, according to the Project on Student Debt. That debt load averages $19,200 per student, and many graduates face the prospect of having to pay back much more.

Once all the partying is over, this year's graduates will start to ask: "What can I do about my student loan debt?"

Well, there is plenty to be done before the debt starts to come due -- in about six months for most. Graduates will need to act fast and think through their choices.

One move graduates should consider is consolidating their federally backed loans. This decision should be made before July 1. That's when the federal government will recalculate the interest rate on variable student loans. Although Congress changed the law so that Stafford loans made after July 1, 2006, are fixed at 6.8 percent, there are still plenty of loans out there with variable rates.

The variable interest rate on most federally guaranteed student loans is readjusted annually based on the final 91-day Treasury bill auction before June 1. The new rate becomes effective July 1 and it could increase from the current 6.54 percent.

Under the federal consolidation program, student and parent borrowers can bundle all of their loans into one fixed-rate loan and stretch out the payments to 30 years from the standard 10 years, depending on the debt amount.

You can consolidate your federal loans only once, unless you have new loans that were not included in the original consolidation. You can no longer consolidate while you are still in school. And when you do consolidate, you lock in the weighted average of all your student loans, rounded up to the nearest eighth of a percentage point.

If you decide to consolidate to avoid a possible rate increase, you'll have to get your application in by June 30. Another reason to act fast: Graduates who consolidate their Stafford federal student loans during their grace period -- the six months after graduation -- are eligible for a 0.6 percent interest-rate reduction.

So here's a to-do list for college graduates with debt:

· Write down every student loan you have, including the amount and the name and contact information for the lender. If you aren't sure about this information, you can find details of your student loans by going to the National Student Loan Data System, which is the Education Department's central database for student aid. The Web site is http://www.nslds.ed.gov.

· Don't consolidate until you've done some research. Despite what you may hear from lenders, there's a lot to consider about this choice, such as the fact that extending your loan increases the total amount you owe. Start with the Education Department's Web site at http://www.loanconsolidation.ed.gov. Click on the link for "Borrower Services." Another excellent resource is http://www.finaid.org. You'll find lots of tips on what to watch for in choosing a consolidation lender.

· Now go to the Web site for the Project on Student Debt at http://www.projectonstudentdebt.org and click on the link for "resources." This nonprofit has compiled a very helpful guide explaining the discount offers for consolidation loans. Lenders vie for your business by offering various discounts.

For example, most lenders will reduce your interest rate if you make a certain number of on-time payments. While that reduction for on-time payments is enticing, there's a catch. You have to be on time all the time for the life of the loan. Miss even a single payment and the discount could disappear.

· Next, compile a list of lenders to comparison-shop various offers. Considering all the controversy about conflicts of interest in the student loan industry, don't just rely on the preferred lender list from your school. There's one important change you may not know about. You can now consolidate with any lender, even if all of your loans are with a single lender. One source for comparison shopping is SimpleTuition ( http://www.simpletuition.com). This company has created a database much like those for finding competing airline rates. The database is limited and lenders pay a fee to be listed.

· Once you have narrowed down your lender choices, use the http://www.finaid.org loan discount analyzer, which breaks down the discount rates in real dollars. When you see the calculator it looks a bit daunting. But don't be intimidated. Take the time to fill out the calculator carefully so you get a clear idea of what each lender's discount is worth long term.

I know you may have a lot on your plate, what with possibly moving and getting settled into a new job. The last thing you may want to do right now is think about your student loans. But you're in the real world now, so do the real work it takes to find the best consolidation loan deal. After all, that debt is going to be with you for a while.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.