My nephew, Matt, is lucky. In June, less than two years after graduating from American University, he finished his M.A. in foreign policy and soon after, landed a position with the U.S. Treasury investigating financial fraud.

Matt's always been ambitious, but he also has something valuable: no undergrad debt, thanks to a trifecta of scholarships, generous grandparents and my sister, who went back to work full time when Matt announced his goal in junior high.

Unfortunately, too many of Matt's peers don't have his resources, and the money they borrow for college is pressuring them to delay marriage, start a family and buy a home, says Tamara Draut, author of Strapped: Why America's 20- and 30-Somethings Can't Get Ahead . "It's hard to feel like an adult when you have a storm cloud of debt hanging over your head for a decade."

Today, two-thirds of undergrads who borrow graduate with just under $20,000 in loans, according to the College Board's 2005 Trends in College Pricing. That doesn't include credit card debt, adds Draut, who directs the program for economic opportunity at Demos, a research and policy advocacy group in New York City.

Now that summer is waning and recent grads are starting to recover from their post-graduation fun, they face settling into the "real world" by finding an apartment, buying a car and beginning life on their own on an entry-level salary. All these factors make it likely they'll incur even more debt. Moreover, higher interest rates will make paying back debt harder, notes Steve Rhode, founder of the Myvesta Foundation, a consumer-education group.

"So many people have this load of debt on their backs," says Suzanne Boas, president of the Credit Counseling Service chapter in Atlanta. "In talks that I give now, I refer to this new generation as our indentured servants."

To get out of this servitude, 20-somethings need a plan.

The Best Way to Budget

Recent grads should remember that they have a six-month grace period before federal loan repayments start. Repayment on private loans can be deferred, but will accrue interest. Federal loan repayments can be delayed another 36 months for certain income levels, or professions such as health care or the Peace Corps, says Draut. Check out repayment guidelines at the government's student aid Web site .

Meanwhile, though it seems that additional costs are piling on, it's key to remember the importance of living on a budget. "Think of the income from your first job as training wheels," says Rhode. "Every graduate feels compelled to buy a new car, but that may not be a good decision. Pay off your credit card and get your loans under control first before loading on another debt."

When it comes to paying off those student loans and credit cards, commit to specific goals with a timetable, Boas says. If you want to pay off $20,000 in 10 years, that's $215.08 a month under a standard repayment plan, if you locked in a rate of 5.30% before consolidation rates changed on July 1. Use a calculator to crunch your own numbers.

Use that grace period to tackle your highest interest debt first, which are usually credit cards. You must pay at least the minimum, but think twice about scraping by with the lowest-possible payment. If you've got $2,500 on plastic, with interest at 13%, paying the minimum of $62.50 will take more than 15 years and add $1,732.95 in interest. Squeeze your budget for a monthly payment of $100, and you knock out that balance in 30 months, and reduce the interest paid to a fraction. Double your payment to $200 every month, and you're done in 14 months.

After paying off your credit card, Rhode suggests "save a third, invest a third, and blow a third."

Say after paying this month's bills, you have $300 left over. Put $100 into a "boring old savings account" that gives you immediate access to your money for the inevitable emergencies of life. If an unexpected cost, like a flat tire or injury, occurs, you'll wind up putting that bill back on your credit card because you have no cash, Rhode notes.

Most savings accounts pay about 0.50% interest, but online accounts at Citibank and HSBC are paying more than 5%.

In addition to creating liquid savings, commit $100 every month to a mutual fund. Rhode says, "It's critical to start saving for your future immediately."

Most financial services companies require a minimum investment of $2,500 and more, but if you have $500 from graduation gifts, open an account at American Century , which requires a monthly investment of $100. Rhode recommends target-date funds, which contain an investment mix that adjusts as you get closer to retirement.

These funds can earn you more in the long run than servicing your student loan debt at 5.30%, notes Rhode.

But investments aren't guaranteed, so if that makes you uncomfortable, invest in short-term certificates of deposit, which are federally-insured and now earning rates of 5% or more.

And then there's the easy part. "Have fun with the rest or you can't stay motivated," Rhode says. Matt celebrated his M.A. and new job with a 40" plasma TV. After paying his credit card and other bills, he's saving at least $200 a month.

For too many grads, though, "the 'debt for diploma' system" makes starting-out responsibility, financially speaking, very difficult, says Draut. The shift from free grants to loans since the early '90s has more than doubled the debt burden of grads who borrow to go to school. That's why it's important to learn to calculate for the real world so you can fulfill the high expectations that motivated you to go to college in the first place. has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from

Dorianne Perrucci has been helping consumers dig into personal finance since 1998, when she reported for Jane Bryant Quinn's columns in The Washington Post and Good Housekeeping. Since 2001, she has written for Newsweek, The New York Times and Consumer Reports, among others.

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