This just in: more bad news from the front lines of the recession. According to the U.S. Department of Education, the student loan default rate has climbed from 4.6 percent in 2005 to 5.2 percent in 2006 to a preliminary figure of 6.9 percent for 2007. The 2007 rate is based on recent grads who began repaying their loans between October 2006 and September 2007 and defaulted before October 2008.

Of course, the recession is to blame:

The new rates “are from the early recession period, so that is the likely explanation for the increase,” Robert Shireman, a senior adviser to Education Secretary Arne Duncan, said in a statement.

So how can current and future students sidestep these sad loan statistics? Some tips on avoiding loan default:

>> Consolidate your cashola.
Consolidating your student loans enables you to combine all your loans into a single loan so you can reduce your number of monthly payments. This makes repayment more manageable and it can also lower the amount of your monthly payment.

>> Make a new plan.
You can also lower your payments by changing your payment plan. Extended repayment, for example, enables those with more than $30,000 in student loan debt to lower their monthly payment by extending the loan over 25 years instead of 10 years. Other options include graduated, income-contingent, income-sensitive, and income-based repayment.

>> Defer the question.
Deferring your loan just means postponing payment. The nice part is that if you have a subsidized Direct Stafford or Consolidation loan, the government will pay the interest while the loan is in deferment. For all other loans, unpaid interest capitalizes (is added to the principal balance) when you enter repayment. There are several types of deferment, including programs for current students, military personnel, and new parents. Click here to determine your eligibility for deferment.

>> Grin and forbear it.
Forbearance is an arrangement to postpone or reduce your monthly payment for a specific period of time, during which you are charged interest. You may request forbearance of principal, interest, or both. But even if you receive a forbearance of interest, it will continue to accumulate and it will be capitalized when the forbearance ends. Click here to determine your eligibility for forbearance.

And the most vital tip for avoiding loan default:

>> Communicate your concerns.
Lenders will do everything in their power to help you avoid defaulting on your loan – as long as you keep them in the loop about your financial situation. Contact them at the first sign of trouble, and you can make arrangements to keep your loan (and your credit rating) in good standing.

–Robyn Tellefsen

Got any more tips on effectively managing your student loans? Post away!