As members of the collegiate Class of 2001 prepare to collect their diplomas, many also will need to consider how they will repay their education loans. You, no doubt, will be counseling with these spring graduates and can remind them that they have several flexible payment options to help them manage their college debt.

Student-loan borrowers typically enjoy a six-month grace period following graduation. No student-loan payments are required during this period. Nationwide, approximately 2.2 million former students begin paying back their student loans each year.

Student-loan borrowers can select from the following options:

• Level Repayment. The most popular and usually the least expensive repayment plan, level repayment provides a fixed monthly payment of at least $50 for a term of up to 10 years.
• Graduated Repayment. For borrowers with low initial incomes but prospects for higher future earnings, this option initially provides low monthly loan payments that increase at specified intervals during the 10-year repayment period.
• Extended Repayment. A new option for graduates who have accumulated more than $30,000 in education debt, this plan provides a reduced monthly payment, because borrowers can take up to 25 years to repay their loans. This option is available to borrowers who first took out a federal student loan after Oct. 7, 1998.
• Income-Sensitive Repayment. As the name implies, payments are based on the borrower's income, although the payments must be sufficient to cover accruing interest.
• Loan Consolidation. Borrowers may bundle multiple student loans into a single monthly payment and, depending on their outstanding balance, extend the payback period up to 30 years. Loan consolidation can reduce monthly loan payments by as much as 40 percent. Consolidation-loan interest rates are fixed and based on the weighted average of the rates on the underlying loans, rounded up to the nearest one-eighth of 1 percent, to a maximum of 8.25 percent.
• Deferment and Forbearance. If soon-to-be graduates have not found a job or are having economic difficulties as they approach repayment, they may qualify to temporarily suspend or reduce their monthly loan payments. Borrowers who meet federally prescribed criteria qualify for a deferment. Borrowers who fail to qualify for deferment still may request forbearance from their lender.

Tips for Repayment:

• Choose a plan that provides an affordable monthly payment but repays the loan in the shortest possible term. Extending the repayment period increases total interest costs.
• In general, monthly student-loan payments should not exceed 8 to 10 percent of a borrower's gross monthly income. Borrowers whose monthly payments exceed this level should explore one of the flexible repayment options or consider loan consolidation.
• Graduates who are earning sufficient income can prepay their loan principal without penalty and reduce the total interest costs of their loans.
• Many student-loan borrowers can reduce loan costs by having their monthly payments deducted automatically from their bank account and by consistently making their payments on time. Many lenders offer interest-rate discounts to borrowers who allow automatic debit of their payments and who have a history of paying on time.