As Sal notes below, Fr. Rob has a happening thread on the topic of co-habitation before marriage the negative effects it bears. Yet because so many couples are doing it, what's a pastor to do? Unfortunately, since Catholics have a right to the sacraments, and because only the Holy See can establish impediments to marriage, a pastor can delay marriage, but he cannot stop it. This means that if the parties are free to marry, then sooner or later the pastor must proceed with the wedding.
However, not all is lost. As damaging as pre-marital sex is to marriage, in my personal opinion it is still second to the damage caused by contraception. Thus the idea of sending couples to NFP counseling is a good one, since from my experience in marriage ministry, the practice of NFP within marriage reverses much of the damage of pre-marital sex. NFP goes a long way in helping couples to become self-giving in the marriage, so that they give themself over to the other spouse completely - spiritually, physically, emotionally, psychologically. Thus the couple sbed the selfish approach to sexual relations that they first learn through pre-marital relations. In fact, I've seen numerous marriages healed through NFP that had been damaged through pre-marital sexual activity and contraception earlier during the marriage.
For an excellent (and true) story about how NFP healed an adulterous marriage on the verge of divorce that had begun through premarital co-habitation and contraception, call 1-800-55-ENVOY and order a copy of Surprised by Truth 3. This volume, which also includes my own reversion experience from the SSPX, features the story of Greg and Julie Alexander who, through NFP, found God's grace to save their marriage after already having decided to divorce.
Eeeh! S.B.T. 3!! I have to get it...