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November brings a nerve-wracking deadline for May's college graduates. It's time to make the first payment on their student loans. But with this year's tough job market, many graduates don't know how they'll come up with the money.

NPR's Claudio Sanchez reports.

CLAUDIO SANCHEZ: Samantha Green graduated from Indiana University in May with a $50,000 debt, a degree in communications and a burning desire to start her career in Chicago.

Ms. SAMANTHA GREEN: I've had a few job offers, jobs that people are always hiring for: sales.

SANCHEZ: Most are temporary, minimum-wage jobs, says Samantha.

Ms. GREEN: It's just not something that is a good fit for me.

SANCHEZ: Samantha's job prospects are so poor, her parents are paying part of her rent, the electricity bill, groceries. And now they've also started paying back the student loan Samantha needed to finish school, about $300 a month, says Matt Green, Samantha's dad.

Mr. MATT GREEN: Fortunately, we have some money saved so we're able help her. But I think that we have to bring her home and say, look, you know, you need to live under our roof until you're able to get yourself a job. And we knew the job market was tight, but we really didn't expect it would take her this long to secure any kind of employment.

SANCHEZ: An absolutely dismal job market, experts say, is driving up the student loan default rate, and no one hears more stories about it than Mark Kantrowitz, founder of FinAid.org, a popular Web site that dispenses student financial aid advice.

Mr. MARK KANTROWITZ (Founder, FinAid.org): Most often I hear from students who have over-borrowed for their education and are trying to avoid going into default on their loans.

SANCHEZ: The current default rate is about seven percent, nearly twice what it was in 2006. About a quarter of a million people who were supposed to start paying their student loans back in 2007 have not, and that doesn't include 2009 or 2008 graduates like Gregory Cendana. Cendana, a UCLA graduate, was the first in his family to attend college. His parents couldn't contribute very much money, so he qualified for the maximum amount of federal aid.

Mr. GREGORY CENDANA: I still had to work three jobs throughout my four years, and I still ended up with more than $40,000 in loan and credit card debt.

SANCHEZ: Gregory's salary before taxes today is $35,000 a year. His monthly loan payment - about $350 - is not a huge amount, but it doesn't leave very much for him to live on in Washington, D.C., where he's president of the U.S. Student Association.

Mr. CENDANA: It's difficult. And I feel like I shouldn't have had to live paycheck to paycheck, especially with a UCLA degree. I don't have a car. I have the bare minimum when it comes to food. I don't even have cable or any TV.

SANCHEZ: Gregory says his parents both had to take second jobs to help him because the consequences of going into default are really scary. Your loans are turned over to a collection agency. Your wages can be garnished. The government can withhold your Social Security benefits. And, of course, your credit will be ruined.

Graduates can defer their loans payments for up to three years if they're deemed hardship cases. But there is one other option students have never had before. In July, Congress passed the Income-Based Repayment Plan, which allows graduates to pay back the federal government loans based on what they earn. It limits payments to no more than 15 percent of a person's monthly income.

Mr. KANTROWITZ: It's going to be a great plan for borrowers who are under financial distress.

SANCHEZ: Again, Mark Kantrowitz of FinAid.org

Mr. KANTROWITZ: The Income-Based Repayment Plan will prevent a lot of defaults.

SANCHEZ: Rule of thumb, says Kantrowitz, borrow less than what you expect to earn right after graduation. So if you go after a bachelor's degree, don't borrow more than $45,000. That's easier said than done for Samantha Green in the Windy City. But Samantha says she has a backup plan.

Ms. GREEN: If I can't find a job, I'm going to apply to grad school.

SANCHEZ: Which probably means another $50,000 in loans.

Claudio Sanchez, NPR News.

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