EDITOR'S NOTE: This is the second installment in a series featuring how students foot the bill for their college degree.
Over the next several months, The Bee will follow five local college students to show how they pay for college, whether it's competing for scholarships or grants, working at on-campus or off-campus jobs, relying on help from their families, or taking out loans. They'll open their books so we can see how they manage the costs. Today's story focuses on loans — the types that are out there, why they're becoming a "necessary evil" — and advice from students and financial aid counselors. Of the series's five students, two have taken out loans.
Devonte Ruff took out his first loan this year — $3,000 through Wachovia to help pay his rent.
Tuition, textbooks and fees are "mostly taken care of" through grants and scholarships, said Ruff, who's studying biology for a career as a surgeon.
"I was afraid," said the University of California at Merced sophomore."Mymom took out a loan for my sister and my sister didn't finish college. It took my mom a long time to pay it back. You have to just go ahead and do it. I'm going to be in school a really long time."
More and more, loans are becoming a "necessary evil" for students and their families as the price of attending college rises and grants haven't increased enough to keep up.
Interest rates range from 3 percent to 6 percent for federal student loans and can be as high as 10 percent from private lenders.
Students and their families use a combination of sources to pay for college. On average, 35 percent comes from federal loans, 25 percent from grants and scholarships, and 20 percent from working, according to Tamera Briones of Education Finance Partners, a private student loan company based in San Francisco.
The remaining 20 percent leaves students and families scrambling to cover the gap with private loans.
U.S. college tuition has increased 59 percent in the past decade. Family income has increased 2 percent over the same time, Briones said.
"Borrow only what you actually really need to stay in school," advised Tom Tompkins, financial aid adviser at California State University, Stanislaus. "You can always ask for more down the road."
Loans are Diana Ralls' least favorite subject.
"No one likes loans; they are debt," said Ralls, financial aid director at University of California at Merced. "But they have become reality."
$15,000 average loan debt
Loans usually are a last resort for families after students receive all the grants and scholarships they're eligible for (and don't have to pay back). Anyone attending college can apply for loans.
More than one-third of U.S. college students took out an average of $5,600 in loans for the 2003-04 school year, the most recent data available from the National Center for Education Statistics.
The average California student graduates with $15,000 in loan debt, according to a 2006 report by The Project on Student Debt. Students and counselors emphasize the debt is worth it in the long run. Adults with a bachelor's degree earned an average of $22,909 more per year than those with high school diplomas in 2004, according to the U.S. Census Bureau.
"What I tell students is, investing in your education is the best debt you can take on," Ralls said.
Loans take a few forms:
Stafford and Perkins loans from the federal government come subsidized (the government pays the interest) and unsubsidized (the student is responsible for the interest). Interest rates are lower than for private loans, but loan amounts are limited to between $3,500 and $6,000 per year. Eligibility is based on financial need.
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