Relief for Panic-Stricken College Grads

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While college students graduate with increasing debt and fewer job opportunities, the situation isn't completely bleak.

A number of industries are showing job growth, especially old technology stalwarts such as the medical field. Also, student loans are remarkably forgiving, and with interest rates at low levels, graduates can cheaply consolidate their loans.

"The great thing about student loans is that they're pretty flexible. They're calculated on a 10-year payment schedule, and there are options for longer-term arrangements," says Jacqueline King, director for the American Council on Education's Center for Policy Analysis.

Borrowers can postpone principal payments if they're unemployed or disabled by filing for a deferment. Depending on the type of federal loan, the government will pay the interest. Even borrowers with jobs can cite economic hardship and file for forbearance, with lenders postponing payments on principal while interest accrues. "Lenders will work with students to work out payment plans," King says.

Most students aren't aware of these options, however. A study from the U.S. Public Interest Group said only 35% of students knew about deferment and forbearance. "There's no reason why people should default on a student loan because of the options people have, even in the more dire of circumstances," says Ivan Frishberg, spokesperson for the State PIRG's Higher Education Project.

Pay It Down

If borrowers can't push off payments, they can consolidate their loans into one low monthly payment. Under a loan consolidation, students take multiple government loans at varying rates and create one single loan at an average fixed rate. For example, a student with two loans at $1,000, with one at a rate of 8% and the other at 7%, would have a single $2,000 loan at 7.5%.

Without consolidation, the rate on a student loan varies once a year with the 91-day Treasury bill. Every July, borrowers receive a brand-new annual rate based on where this index is, and, thanks to 11-straight cuts to the

federal funds rate from the

Federal Reserve

, rates are lower this year.

Last year, the interest rate on federal Stafford loans was 8.19%, not far from the maximum rate cap of 8.25%. But this year, Stafford rates are just 5.39% and could be even lower when rates adjust for next year this July, because the 91-day Treasury is currently below last year's level.

Consolidation takes about two months to complete, so borrowers should start the process by May and begin paying off credit card bills. "You don't want to let those mount, because their interest rate is exorbitant," says John Challenger, CEO of the outplacement firm Challenger Gray and Christmas.

Get a Job

Overall, the job market is tough, but certain sectors such as sales, administrative, customer services and education offer opportunities.

This year, sales positions account for 19% of entry-level positions available to college graduates, while administrative and support services positions account for 13%, according to a study from Monster.com. "If they look at education, health care and nonprofit, they're also going to find there are jobs available," says Ken Ramberg, senior vice president with MonsterTRAK, Monster.com's college graduate resource center.

In fact, competition for graduates in the medical space is so tight that employers have begun offering signing bonuses between $5,000 and $10,000 and tuition repayment programs -- perks once reserved for high-tech graduates. "There's a huge shortage of nurses. The projections show there will be a shortage up until at least 2008," says Roberto Angulo, CEO of the college recruiting service AfterCollege.

Other areas, such as biotechnology and pharmaceutical research, are also hot, Angulo says. And many jobs don't require a degree in chemistry or nursing. "It's all about applying knowledge a student has in one area to another discipline. An electrical engineer could go into something like medical imaging," he says.

Therefore, graduates should consider a wide variety of jobs, start looking immediately and talk to family, friends and faculty to locate openings. Many times, smaller companies are hiring while larger corporations slash their budgets.

"It'll take a while. It's not uncommon to see people who have been looking for jobs for six months, when they thought they'd be looking a few months at best," Angulo says.