After graduating from college, students generally have a six-month grace period before they must start repaying student loans. What should they do in the interim? The obvious answer is to find a job and begin working.

But, actually, there's much more to it than that. College seniors who graduate with student loans own, on average, $14,671 for a four-year public college and $17,125 for a four-year private college, according to a National Postsecondary Student Aid Survey (2003-2004). To help graduates manage these bills, federal laws have mandated that all accredited higher education institutions provide exit counseling to students who have federally guaranteed student loans.

Benefits of student loan exit counseling
"An exit interview is important for a couple of reasons," says Ben VanSant, a financial center manager with Fifth Third Bank. "Most important, it gives students a clear understanding of what they owe. Graduates receive a list of all lenders, the loan amounts, interest rates and monthly payments. They can also use this information when developing a budget."

The federal government has mandated exit counseling as a way to reduce default rates, which is when people fail to meet their repayment obligations. When people default on student loans, they may also face poor credit scores, IRS penalties and garnished wages.

When to consider a consolidation loan
Once new graduates have a clear understanding of their student loan obligations, they can develop a budget that compares their monthly expenses with their monthly take-home pay. "Some people discover that repaying all their loans at once is not affordable," says VanSant. When that's the case, people may want to consider a consolidation loan.

"Basically, consolidation is a payment management tool that allows people to bundle all their federal students loans into one manageable loan," he explains. "This offers new graduates many benefits. Instead of paying a half-dozen individual loans at once, they can pay just one larger loan - and structure it over a longer period of time - sometimes as long as 30 years."

Depending on how the loan is structured, consolidation can reduce monthly payments. It may also allow some people to lock in at a lower interest rate, especially if their original loans had variable interest rates. "People may choose to pay off their loan earlier and reduce interest," VanSant adds. "There are no prepayment penalties."

Some consolidation loans come with flexible payment options. For example, if borrowers have an economic hardship or decide to return to school, they may ask for a deferment. This is permission to postpone payments. Also, some loans are structured according to how much money people make. "It's important to ask lenders to explain all possible options," VanSant says.

In some cases, interest on student loans may be tax deductible. People need to consult a tax advisor to see if that is an option for them.

Be cautious with credit card debt
New graduates must also be careful with credit card debt. "Many students rack up a lot of credit card debt while in college, which can negatively impact their credit scores. If they have collateral, like a house or a car, they may consolidate several credit cards into one loan. Otherwise, I recommend they live according to their means and pay off those cards with the highest interest rates first," VanSant says. "Establishing good credit is very important, and new employers and landlords often use credit scores when evaluating candidates."

For more information on student loan consolidation, contact Fifth Third Bank at (866) 475-4201 or visit the Fifth Third Website.

Loans are subject to credit review and approval.