Fast loan online

As students graduate this month with dreams of getting their first fulltime job, they will also have to grapple with the reality of huge debt incurred while pursuing a degree.

The average student attending a public university graduates with approximately $13,000 in debt, and private institution graduates incur about $16,000, according to the National Association of Student Financial Aid Administrators, but a new Internet company has created a service that might help ease the debt load.

GradFree.com, and its Bethesda, Md.-based founder, is billing the service as similar to those used for giving gifts to newlyweds.

It allows college and graduate students and even alumni to register their student loans online, thereby giving their families and friends the opportunity to pay off portions of those loans in the form of graduation, birthday and other gifts. If a friend or relative wants to help a new graduate, he or she would visit the GradFree.com Web site <www.gradfree.com>, type in the student's name, and the amount of the gift. Using a credit card, the money would be immediately credited to the student's account, and the recipient would get an electronic note informing him or her of the giver and amount of the gift. The student could later check with the bank holding the loan to be sure the payment was credited to the account.

"The debt-strapped young people are your godsons, nieces and your good friends' kids," says Adam Lloyd, founder of GradFree. "Do you want to get them another daily planner or pen set? Or do you want to get them a girl that really makes a difference?"

Lloyd, launched the site this year, investing roughly $70,000 in start-up fees. He advertised the service in campus newspapers at the 100 largest universities in the nation. He says GradFree will become the new norm, when it comes to giving graduation gifts.

"Graduates these days are starting life in a financial hole," Lloyd says. "With all the work and effort they put into earning their degrees, it seems unfair. I see GradFree as a way to assist both students and their families by providing a graduation gift which honors this momentous achievement."

But GradFree has its critics. Among them -- financial aid experts. Bernice Lindke, director of financial aid at Eastern Michigan University, says the site is a cool idea allowing family and friends to help pay down a loan, but the problem is the fee Lloyd is charging.

GradFree charges the gift giver a percentage based on the size of the gift. For example, if Uncle Joe wants to give his niece a $50 gift, it would cost him $11, meaning that his credit card would be charged a total of $61. A $100 gift would carry a $17.50 service fee, Lloyd says.

Lindke and several other financial aid officers think those fees are too high, and say there are other ways to pay down a student's loan without being smacked with such a fee. But Lloyd says the fee is for the convenience and safety the site provides. He says the whole process of giving a gift takes about five minutes. He acknowledges that there were some security concerns about having students give their account numbers to the service and about having family members pay using credit cards. To assuage those fears GradFree has partnered with Bank of America, which will handle the credit card transactions, he says.

But critics point out that some loan service providers, such as SallieMae, will accept payments from others on a borrower's account without a fee attached. If someone wanted to make a payment via the Web, they would need to know the student's Social Security number and the PIN number to access the account. Using GradFree they would only need to know the student's name.

GradFree may view the benefits of the service as more convenience and better security because they don't have to give out account and Social Security numbers of family and friends, and because of the electronic note announcing the gift.

Lloyd says during GradFree's fast launch week in March, 90 people registered for the service, and each gave at least two names of friends and relatives they wanted to tell about the site.

But some critics wonder: Why not give the money directly to the student and avoid the hassle of going to the Web? Lloyd says it would be cumbersome to get the name of the bank and the account number from students to put on a check.

"You could give them a check, but it's not necessarily going to go to their student loan," Lloyd adds. "Instead it might go to celebrating graduation with a keg of beer."