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How to manage student loan debt

By Michelle Singletary
Sunday, June 6, 2010; G01

Soon the sounds of "Pomp and Circumstance" will fade and thousands of college graduates will have to really start facing the music -- their education loans.

For them, I have a new tune: Know what you owe.

That should be the mantra for every student borrower because an unsettling number of graduates -- and their parents -- only have a vague idea of how much has been borrowed. It's only after the degree has been obtained that they add up the costs. Many don't know who they borrowed from or how many different loans they have.

In 2008, about two-thirds of students graduating from four-year colleges and universities had student loan debt averaging $23,200, according to data analyzed by the Project on Student Debt, an initiative of the nonprofit Institute for College Access & Success.

Okay, graduates, so now that you have your degree, what do you know about your loans, and how will you manage them?

Remember CliffsNotes?

For this month's Color of Money Book Club selection, I am recommending a CliffsNotes book -- "Graduation Debt: How to Manage Student Loans and Live Your Life," by Reyna Gobel. True to the CliffsNotes brand, this compact guide walks you through the student loan labyrinth starting with "know what you owe."

"In order to work toward paying off your student loan debt, you need to be aware of the existence and the amounts of each loan," writes Gobel, a freelance financial journalist who amassed $63,000 in student loans obtaining her bachelor's and then two master's degrees.

More than 1 million people have at least $40,000 in student loan debt, according to data from the National Center for Education Statistics, Gobel reports.

The book starts with a pop quiz that I know many recent graduates would fail: How many different federal student loans do you have? Do you know the servicers on each loan or the interest rates on every single loan, or how many are subsidized or unsubsidized?

"Whether you just graduated from college or you've been out of school for a decade, it's not always easy to keep tabs on eight semesters of loans," Gobel writes.

She is tender where I might be tough. I think you darn well should know intimately every single loan you've taken out long before you take that graduation march, especially when you're locking yourself into financial bondage for several decades. Maybe if more students kept up with how much debt they were accumulating and the interest due, they would borrow less.

But if you don't know the answers to Gobel's questions, go to the National Student Loan Data System at http://www.nslds.ed.gov. This is the U.S. Department of Education's central database for student aid. Gobel walks you though the process of finding information about your individual loans.

"Brace yourself, because you are going to see how much interest has accrued since the first day you borrowed your first student loan dollar," Gobel cautions.

Don't think Gobel's advice to create a cheat sheet of your loans is trite. I was working with one student who, after finally organizing her loan data, found a forgotten loan that was already in default. She had been getting notices about the loan but said to me: "I just couldn't face the debt." She didn't open the notices.

Forgetting a loan, Gobel writes, is a fairly common problem. People think they are making payments on all their loans only to discover a loan was left out. It even happened to the author.

"If payments had been organized, this never would have happened," she writes.

You'll find what you need in this book from evaluating your debt situation to repayment and consolidation options to paying your student loans off early.

While many professors may discourage students from using CliffsNotes, I assure you this particular guide is a shortcut that will well serve borrowers looking for a concise road map to handling their education loans.

As with all Color of Money Book Club selections, I'll be hosting a live online chat about the book with the author. This one will be at noon Eastern on June 17 at http://washingtonpost.com/discussions. By the way, I would be interested in hearing how many of you are handling heavy student loan debt.

The online chat is a way for book club members to meet virtually and talk, ask questions or just vent. Every month, I randomly select readers who will receive a copy of the featured book, donated by the publisher. For a chance to win Gobel's book, e-mail colorofmoney@washpost.com with your name and address.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

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.

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