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.
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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.
Even recipients of substantial grant packages pay one-third to half of their annual income on college costs.
"Everyone gets squeezed," said Diana Ralls, UC Merced financial aid director. "Lower- income students get both gift aid and loans. Students who aren't eligible (for grants) only have loans."
Many parents who planned on taking out an equity loan or second mortgage on their homes to help cover college are finding housing values erode in the real estate downturn and tighter credit, mortgage lenders said.
Stockton's Terry Adams will have two daughters in college this fall. He and his wife are finding it difficult to help both with college costs. Naomi, 21, will start a graduate program in speech pathology at CSU, Fresno, and Natalie, 17, is hoping to attend CSU, Chico, or Delta College in Stockton.
The sisters and their parents are researching which loans they could take out next year, if necessary.
"I'm always looking at (loan) interest rates, when the repayments are due, if the interest is deferred (until after graduation)," said Terry Adams, a small-business owner who makes $50,000 to $75,000 a year.
"It's gotten a lot more expensive. I was able to pay for my own college -- all six years of it -- and it wasn't a burden to me" like it is for today's students, he said.
March deadline for federal aid
The busiest time for taking out loans runs this month through September. But students can apply for loans throughout the year, so counselors urge students to borrow a few thousand dollars and come back if they need more.
For those looking into financial aid, officials offered some tips.
First, any college student looking at financial aid needs to fill out the Free Application for Federal Student Aid. FAFSA's deadline in California is the first week of March each year, but the application can be submitted anytime.
Students should make the March deadline if they're seeking first-come, first-served grant money.
Counselors urge students to seek all other aid before turning to loans. Scholarships and the Pell and Cal grants are free money with no repayment or interest attached. Universities also give out grants.
Christina Kelley, 40, is using as much free money as possible. Majoring in economics, Kelley receives grants and scholarships, but still will need about $4,700 to help her cover the cost of living over the summer while she takes classes at CSU, Stanislaus, and doesn't work.
"It was my last resort. I didn't want to do it. I don't want to have that over my head, because who knows what's going to happen," said Kelley, a single mom of four children, ages 16 to 22. "But it was take out the loans or I was not going to make it through the summer."
Loans should be considered after other options are maxed out. The best loans are through the federal government. It offers loans with little or no interest. Parents also can take out federal loans with low-interest rates, called PLUS loans.
Students also can look for state and federal loan programs that offer money to those pursuing public service careers such as teaching and nursing.
Loans from private companies should be the last option because, financial aid counselors said, they have higher interest rates and poorer repayment options. These are referred to as private or alternative loans, with interest rates that can climb as high as 20 percent depending on the applicant's credit history.
The key is talking to financial aid counselors, whether in person or via e-mail.
"I would advise students to make sure they understand all the terms and agreements of their loan provider. Make sure you really do your research to find a loan that's right for you," said Niloufar Tahery, a UC Merced psychology senior, who is taking out $5,500 in loans next year. "Definitely talk to a financial aid counselor; they know all the right information and tools that can help make paying for college less stressful."
Average grad owes $17,250
Students are deeper in debt today than ever. Two out of three college students graduate with loan debt and the average borrower who graduates from a public college owes $17,250. Ten years ago, the average student borrower attending a public college or university graduated owing $8,000 in student loans (adjusted for inflation), according to a 2006 report by the American Association of State Colleges and Universities.
Private lending is growing 10 times as fast as federal student-loan programs.
Not only has the cost of going to college increased, but private lenders are bypassing college loan officers and advertising directly to college students.
Loan commercials are about as frequent as acne ads on TV channels with teen demographics, such as MTV and VH1. Loan offers also pop up in daily spam e-mails.
Many students flock to these loans because lenders make it easy to take out the money and receive a check, but they don't advise clients on the fine print -- possible high rates, inability to consolidate balances and expected repayment before graduation, high school and college counselors say.
Many private lenders also don't require students go through a loan workshop as federal loan programs do.
"Private loans, it may be the easy route, but it won't be the easy route on the back end," CSU Stanislaus' Tompkins said.
Private lenders also are attractive because the money is sent directly to the student. Some of the federal programs disburse the students' money to their college with any leftover paid to the student at the end of the school year.
This year's shake-up in the loan industry doesn't appear to have changed the amount of loan money valley students are pursuing, counselors said. The credit crisis has made many lenders tighten requirements that decide who qualifies for loans, so CSU Stanislaus' Tompkins predicts many students won't be eligible for private loans in coming years.
That ripple effect could undo efforts in the valley to increase the college-going rate. Students might choose to attend college half time instead of full time, work more, go to a community college instead of four-year universities to save on tuition, or not attend college, counselors said.
All of this affects the state and nation.
"California must curb the disturbing trend of educational and economic stratification," concluded the CPEC study. "... Affordable quality education is paramount, not only to the state economy, but to provide a stepping-stone for people to earn incomes that will elevate overall quality of life for Californians."
Bee staff writer Michelle Hatfield can be reached at firstname.lastname@example.org or 578-2339.