Debt loan negotiate student

America's college students are on a borrowing binge, an understandable state of affairs as the four-year cost of earning a bachelor's degree at some schools soars well past the $100,000 mark. Between 1992 and 1994, federally guaranteed college loans taken out by undergraduates and their families mounted by 69 percent to $18.9 billion. Today, more than half of all federal aid dollars to students takes the form of loans. "The shift in emphasis of federal student aid from grants to loans threatens to create a generation of debtors," warns Robert H. Atwell, president of the American Council on Education, an organization that serves as higher education's primary representative in Washington, D.C.

Typical of this generation of debtors is Valerie Clem, 21, a senior at Winthrop University in Rock Hill, S.C. By the time she receives her diploma next spring, Clem, who comes from a middle-class family, will have accumulated $20,000 in federal loans. "I knew I would have to take out a lot of loans to get through," says Clem, "but now the reality is setting in and I'm very scared."

The explosion in debt is due both to the growing number of students attending college and to the failure of federal grant programs to keep pace with the rising cost of tuition. At the same time, the expansion of federal loan programs has made borrowing far easier. In 1992, Congress helped fuel the lending binge in two ways: It removed the ceiling from a program that allows parents to borrow up to the total cost of four years of college, and it created a new, unsubsidized loan option permitting undergraduates to borrow as much as $10,000 annually--without regard to family need. And if the Republican-controlled Congress follows through on its promise to reduce federal aid to higher education by more than $10 billion over the next seven years, the most likely subsidies to be reduced will be the grant programs. The net result: even more borrowing by undergraduates and their families to make up for the loss of the grants.

Also in jeopardy is the estimated $7.5 billion in direct student loans to undergraduates, a program established in 1993 that allows students to borrow money directly from the federal government instead of having to go through a middleman such as a bank. President Clinton came to the defense of the program last week, accusing the banking industry of trying to scuttle it. Few expect direct lending to be dismantled altogether, but its growth is likely to be halted.

Increasingly, much of the loan burden is falling on the shoulders of the students themselves. Many families cannot--or will not--absorb tuition bills, which have risen faster than family income for well over a decade. "Most students no longer have the luxury of going off to school and having their parents pick up the costs," says Harriett Copher Haynes, director of counseling and consulting services at the University of Minnesota. Even when families are willing to absorb part of the cost, students often have to take out loans on their own and work part time to make ends meet. Although Leslie Rutkowsky's parents have gone into debt to help put her through Bryn Mawr College, the 21-year-old senior from Mahanoy City, Pa., still must hold down three campus jobs during the school year and borrow additional funds to meet her annual college expenses of nearly $28,000. When Rutkowsky graduates in June, she will be $14,000 in debt.

The cost of college has ballooned so high that even very affluent families who earn $100,000 or more a year are thinking twice about depriving themselves of the fruits of their labors in order to underwrite higher education for their children. As Edwin Below, director of financial aid at Wesleyan University in Middletown, Conn., explains: "A lot of parents are in their 40s and ready to start enjoying the benefits of higher salaries and just don't want to pay a lot for college."

Many students, including those from well-to-do families, are deciding that the best option is a public institution, which for in-state students can cost one third the price of an elite private college. As a result, in a number of states the family income of students at public institutions exceeds that of students enrolled at private schools. In Minnesota, for example, a 1992 study by the Minnesota Private College Research Foundation found that the median family income of students at the University of Minnesota in 1991 was $48,250, almost $3,000 higher than the income of families with youngsters at the state's private colleges.

Phil Neiswender, 24, of Gig Harbor, Wash., is among those who opted to take the less costly route. He decided against attending Georgetown University, a highly regarded private institution, after discovering that he would have to borrow about $18,000 annually--about three fourths of the annual cost of room, board and tuition. Instead, Neiswender opted for the University of Washington, and when he graduated last spring, he owed less than $20,000.

Like Neiswender, more students are making the big decision based solely on costs. "I would say it happens about 70 percent of the time," says Cheryl Alston, president of Family Management Services Inc., a consulting firm in Fairfax, Va., that helps families negotiate better financial aid packages.

Bad strategy. To be sure, many experts on college financing warn that choosing where to go to school on the basis of economics alone can lead to selecting an institution that is not the most desirable educational choice. They also point out that as more and more schools offer "merit" aid--awards that are not based on need but primarily on academic performance--the actual cost of attending an otherwise expensive private institution may prove to be less than students and their families think. Last year, for example, Rollins College in Winter Park, Fla., increased the amount of its top merit award to $10,000 for students with a 4.0 high school grade point average and SAT scores in the 1500 range. This cut the total annual cost of attending Rollins by almost half. Lesser awards were offered to students with lower GPAs and test scores. Iara Peng, who scored 1180 on her SAT and had a 3.85 grade point average, received $5,000 in merit aid. "The money definitely influenced my decision to come here," says Peng, a 19-year-old sophomore from Lakeland, Fla.

New data collected by U.S. News show that more than 1,000 four-year colleges now offer merit aid. The best bets for such aid, according to the Consortium for Policy Research in Education: universities that are a notch below the top-tier schools and that are competing intensely for students and liberal arts colleges in the Midwest, some of which have experienced significant enrollment declines in recent years.

Whether or not they offer merit aid, private schools, which often have endowments that produce sizable income, generally have a great deal more of their own money to give out than do public institutions. A Springfield, Va., family found out how a generous grant can narrow the tuition gap between private and public institutions after their daughter applied to both Princeton University and the University of Virginia last year. The young woman, who did not want her name used, was offered a $12,000 financial aid package by Princeton that included both grants and loans. The package required her family to pay $16,000 in the first year. But since her parents have an annual income of more than $100,000, she would not have qualified for financial aid at Virginia and thus would have had to cover approximately $11,000 in expenses. With the after-aid gap between the two schools only $5,000, the student and her parents decided that a degree from Princeton provided the best educational value.

Some might find it surprising that a student from a family with a six-figure income would be eligible for aid. Still, there are many instances where families who earn that much can get significant support. "We try to be sensitive to the fact that even two-profession families with incomes of $100,000 have need," says Claire Matthews, vice president for planning and enrollment management at Connecticut College. The level of need in such situations may depend on factors such as family size, the job status of the parents or how badly an institution wants a particular student. Says Bucknell University financial aid director Ronald Laszewski: "The three basic rules for parents regarding financial aid are apply, apply, apply. The worst that can happen is that they tell you that you don't qualify."