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An improved economy and lower unemployment should reduce the number of recent college graduates who default on the federal student loans they are supposed to start repaying when their six-month grace periods expire - as soon as November for May graduates.

Inevitably, though, some will fall behind even though there is no good reason to do so. Their credit scores will be crippled and they will risk the government garnishing their wages and seizing their tax refunds.

Borrowers need to understand that waiting for student loan collectors to pounce just costs more in the long run, according to financial aid expert Mark Kantrowitz, co-author of "Filing the FAFSA." Interest and penalties inflate overdue debt, and wage garnishment will take far more of borrowers' paychecks than federal income-based repayment plans.

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Perhaps some are listening because the three-year default rate peaked in 2010 at 14.7% and dropped to 11.8% this year for those who entered repayment in 2012.

Kantrowitz predicted the rate would be around 10% for 2013 and 8% to 9% for recent graduates and other borrowers whose six-month grace period ends next month. He credited an improved economy and lower unemployment for most of the drop.

Expansion of income-based repayment plans also may help default rates, but relatively few borrowers are applying for those, according to a recent Government Accountability Office report.

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About half of federal Direct Loan borrowers are eligible for an income-based repayment program, but only about 15% take advantage. The GAO blamed the Department of Education for failing to consistently inform borrowers of their options.

The highest default rates tend to be among people who fail to graduate and those who attend for-profit schools. But some borrowers simply lose track of what they owe, and loan servicers may be unable to reach those whose contact information is out of date.

Here, then, is a game plan for people grappling with student loan repayment for the first time:

1. Find your loans

Most borrowers have multiple loans taken out over time. Borrowers can find their federal loans via the National Student Loan Data System at, or by calling 1-800-4-FED-AID. For private student loans, check

2. Investigate federal repayment options

Federal student loans typically have 10-year repayment terms. Paying the loan off faster will save on interest, but could prevent a borrower from achieving more important goals, such as saving for retirement or a down payment for housing.

Those who have trouble making payments on a 10-year term should check out consolidation, which can lower payments by stretching out the loan term to 15, 20 or even 30 years.

There are also income-based repayment plans for low earners. The latest version, Pay as You Earn, caps payments at less than 10% of the borrower's income and allows balance forgiveness after 10 years for public service jobs and 20 years for private sector employment. For the lowest earners, PAYE can reduce required payments to zero.

3. Check out private repayment plans

Private lenders tend to have fewer repayment choices but may offer loan modifications, interest rate breaks and forbearance for strapped borrowers.

Sallie Mae, one of the largest lenders, offers an interest-only payment option for the first 12 months, said spokesman Rick Castellano.

Borrowers with good credit (or a credit-worthy co-signer) and sufficient incomes may be able to refinance private loans at lower rates. SoFi, CommonBond, Wells Fargo, Earnest, Citizens Bank and other institutions offer refinancing.

4. Consider changing your servicer

New federal loans are made by the federal government, but the feds designate private companies to take your payments, arrange payment alternatives and handle customer service.

Unfortunately, not all servicers are created equal, and borrower advocates complain that some do a lousy job of communicating repayment options or even properly handling paperwork.

Borrowers cannot change their servicer unless they opt to consolidate all their federal education debt. To consolidate, they would apply directly to the servicer they want: FedLoan Servicing (PHEAA), Great Lakes, Nelnet, or Sallie Mae.

5. Know where to go for help

If a problem or dispute cannot be resolved with a loan servicer, borrowers with federal loans can contact the Federal Student Aid Ombudsman and the Consumer Financial Protection Bureau. The CFPB also takes complaints regarding private lenders.

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