Student Loan Rates Rising Amid Joblessness

Six months after graduation, when the first bill arrives, is often where problems first emerge. May's graduating class will start receiving bills this month.

There are several options for borrowers falling behind, including repayment plans with monthly sums that start low and increase along with the debtor's salary. A new option enacted by Congress on July 1 allows qualified borrowers to limit their monthly payments to 15% of their discretionary income. Payments can also be deferred up to three years if the borrower can prove a hardship, such as unemployment.

Congress is working on a package of financial aid reforms. A bill passed by the House in September that's awaiting approval from the Senate would remove private lenders from their middleman role in the distribution of federal loans. Proponents of the legislation say it could save the government $80 billion to $87 billion during the next 10 years, which could help increase the loan pool. The move could have a dire impact on lenders, such as SLM(SLM), better known as Sallie Mae, which manages more than $192 billion in federal and private loans for more than 10 million borrowers.

-- Reported by Joe Mont in Boston.

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