Paying Down College Debt

En español | Many college students face their most arduous test after graduation, when it's time to address student loan debt of tens, and sometimes hundreds, of thousands of dollars.

Paul Hudson/fstop/Corbis

Fortunately, there are things that savvy friends and family members can do to help newly minted grads in an era where student loan debt has surpassed credit card debt for the first time, according to financial aid expert Mark Kantrowitz.

The smartest strategy is to focus on loans with the highest interest rates, not the largest outstanding balance, says Kantrowitz, publisher of financial aid websites Fastweb.com and Finaid.org.

Anyone helping a student whittle down an educational loan should "wait until after the student graduates, because you don't want to reduce eligibility for need-based financial aid," says Kantrowitz, who's heard of medical students owing as much as half a million dollars.

It's a website designed to make it easy for loan-reducing donations to flow. An indebted student or graduate registers at Lilyslist.com, paying a $15 annual fee. Helpful friends and family members can then make donations at the site, which channels the money directly to the student's loan account. Donors are charged a $2.75 transaction fee for each use.

Lily's List sends students e-mail notices when gifts are made on their behalf, says Taylor, who's working with three other mothers to hone and perfect the site. One of the advantages of the program, she says, is that the donor's gift goes toward reducing a student's debt, not to fund a purchase of an iPhone, latte or anything else.

"It's a very heavy thing for these young people to be facing at a young age," says one of Taylor's associates, Beverly Gibson, 54, whose two children will be college-bound in a few years. Lily's List interests Boston University business management major Severine Cukierman, 19, who estimates she'll be facing $20,000 in student loan debt after graduation. "I definitely want to look at anything that will help reduce my load," Cukierman says.

Upromise

Upromise.com wrings debt pay-down from everyday purchases such as groceries, gasoline and clothing. Owned by Sallie Mae, the site has more than 750 participating merchants that designate anywhere from 1 percent to 25 percent of the price of things you buy from them toward a student's educational loans.

"Family and friends can participate on behalf of any beneficiary they choose," Upromise spokeswoman Debby Hohler says. "Every time they book a flight, rent a car, go out to dinner, book a hotel, they can be getting money back that can be used to help pay for college."

Upromise has 12 million members and has funneled roughly $600 million toward student debt since 2001, Hohler says.

Blair S. Walker is a Miami-based writer.