New help for the college-bound and grads

Decades of relentlessly rising college costs coupled with stagnant wages have left more graduates more indebted than ever before. Indeed, outstanding student debt has doubled in the past decade and now totals a record 1.2 trillion outstanding.

With repayment delinquency rates rising, many experts now fear that young people are so overwhelmed by college loans that they'll be unable to buy homes and cars, adding more drag to the already sluggish economic recovery.

However, in the past few months, government agencies have undertaken a disparate series of moves that should help prospective students make better -- and less costly -- college choices, while also helping indebted graduates manage their loans.

Here's a look at what's happening, and how can students take advantage of the changing landscape.

High school students are getting better college-comparison tools and improvements to the way financial aid applications are handled. In the past, aid awards required current-year tax return data to get a firm offer, for instance. That left many students choosing a school before they knew just how much the school would cost after federal and school-based scholarships were subtracted from the bill.

When new rules go into effect next year, students will be able to fill out federal financial aid applications earlier and presumably get clearer guidance on their eligibility for scholarships and grants before they make a college commitment.

Better yet, just last month, the U.S. Department of Education launched a new online tool called the "College Scorecard" that allows students to easily compare colleges by program, cost and outcome. This tool also compares the average salary of graduates from each school 10 years after enrollment.

Thus, an engineering student who's weighing offers from California's Pomona College and nearby Pitzer College can find out that the net cost of Pomona is likely to be half as much as Pitzer, and yet the percentage of students who graduate within six years -- and the average income of graduates -- is much higher at Pomona.

This data gives students a far more sophisticated way to weigh the value of schools with vastly different costs.

"It's a treasure trove," said Tom Allison, deputy policy and research director at the Washington, D.C., advocacy organization called Young Invincibles. "This tool gives you the ability to weigh the likely return on investment of different college choices."

In addition, both the Consumer Financial Protection Bureau (CFPB) and the Department of Education have identified a series of needed reforms for existing student loan borrowers. At present, for instance, issuers of private loans have been able to "auto-default" loans when a borrower's co-signor dies or has an unrelated financial problem. That can trigger a series of fees and charges for the primary borrower -- even if that borrower has been paying the loan as contracted and on time.

Moreover, a lack of consistency in collection practices with federal student loans can leave borrowers with surprise fees and a lack of information about potential repayment options when they get over their head.

While a number of needed reforms -- including extending bankruptcy protection to some student borrowers -- will require legislation, others are simply a matter of enforcement, both agencies said. Indeed, last month the CFPB put lenders on notice that they'll be under increasing scrutiny. Students with complaints can now go directly to the bureau, which promises to help them resolve disputes.

It also has added a borrower repayment tool to its website, so graduates can get clear information about their repayment options.

Anyone who's having difficulty repaying a student loan should use the tool and seriously consider shifting to an income-based repayment plan, said Rohit Chopra, senior fellow at the Center for American Progress. These plans set your monthly repayment amount based on a percentage of discretionary income. If your discretionary income is nonexistent or paltry, the required payment can drop to zero.

But as long as you follow the rules, even zero monthly payments count as on-time repayments. Any portion of the loan that remains outstanding after following the terms for 20-25 years (depending on the program), is forgiven.

"When you make more money, your payments will rise," said Chopra, "but these programs ensure that repayment terms are affordable for everyone."