Loan is a hated word, but more of a necessity for college students these days

Sabrina Medefesser has always worked -- full time or part time, one job or two.

Now that she's taking business classes full time at California State University, Stanislaus, Medefesser is cutting her work hours as a commercial real estate manager.

"I want to put a lot of focus on school, get through, get done with a lot of good grades," said Medefesser, who recently went from working 40 hours to 24 each week.

But a smaller paycheck means Medefesser, 27, has to pay her expenses another way -- student loans.

For the upcoming school year, Medefesser will borrow $4,500 to help pay for Cal State Stanislaus' $17,300 sticker price. She said her income is too high to qualify for many state and federal grants, which are more desirable because, unlike loans, they don't have to be repaid.

"If you make over $25,000 a year, they think you're rich," she said.

Summer is the time college students and their families start researching and applying for loans to pay for the coming school year.

Loans make some students and their families nervous, but the steadily increasing costs of tuition, textbooks, rent and utilities combined with state and federal financial aid levels that remain stagnant can make loans more of a necessary evil than before.

From the mid-1980s to the mid-2000s, the average grant award doubled while the costs of attending college more than tripled, according to a 2008 study by the California Postsecondary Education Commission, the state's planning and coordinating body for higher education.

By itself, working to pay for college won't make the grade as it used to. Low- and middle-income family incomes, less than $70,000 a year, have not kept pace with rising college costs over the past 30 years.

In 2005, families in the lowest 20 percent income group would have needed to spend 82 percent (or $21,000) of their annual income to support a student at the University of California and 56 percent (or $14,200) to support a student at a CSU, according to the CPEC study. Thirty years ago, they would have needed 44 percent ($3,100) of their income to pay for a UC and 33 percent ($2,300) for a CSU.

Attending community colleges can take a decent chunk out of the checkbook, too. And many junior colleges, including Modesto Junior College and Columbia College, don't make federal loan programs available, leaving higher interest private loans the alternative.

'It's a huge decision'

For the 2007-08 school year at CSU, Stanislaus, students received $22.6 million in grants and took out $20.8 million in loans. Through June 20, UC Merced's grants and scholarships totaled $11.5 million and students opted for $9.4 million in loans.

"If you're not high (financial) need and you're not rich , unless you have a 4.2 GPA and you're getting lots of scholarships, there's nothing left," said Tom Tompkins, financial aid counselor at CSU, Stanislaus, who specializes in loans.

Because most financial aid is based on need, the middle class often gets left out and is forced to rely heavily on loans. So, in addition to paying their mortgage and saving for retirement, along with covering day-to-day costs, little is left for college, counselors say.

"It's scary. It's a huge decision (to take out a loan). I don't like debt, but I knew I wasn't going to get any free money," Medefesser said. "But a lot of college graduates told me it's not the same as credit card debt; it's an investment in myself."

A student coming from a low-income family ($25,000 annual family income) will receive an average grant package of $7,700. The student must find $13,300 to fund the rest of the annual cost to attend a UC, according to the CPEC report. A middle-income student ($66,000 annual family income) would receive an average of $2,400 in grants and have to come up with $18,700 to attend a UC campus, the report states.