Birmingham News, July 19, 2009, Sunday

Copyright 2009 The Birmingham News
All Rights Reserved
Birmingham News (Alabama)

July 19, 2009, Sunday

HEADLINE: Students scramble to pay for college As costs soar, some resort to loans, even selling plasma Debt burden weighs on graduates


BODY:
In his freshman year, UAB student Thomas Carter found he was short on cash.

Part-time and summer jobs, including one pouring concrete, weren't enough to provide for incidentals, so he did what he had to do to earn a little more money. He sold his blood at a plasma center for $50 a week, plus an occasional $10 bonus for being a regular.

''Plasma was really my only source of disposable income,'' said Carter, now a junior finance major who wants to be a currency trader.

Students may not be selling their blood in great numbers, but they are scrambling to find new ways to pay for school. According to the College Board, the nonprofit organization be-hind the SAT, the cost of college has doubled in the past 30 years, even after adjusting for inflation. And family in-comes have come nowhere close to keeping up.

The average price of one year at a public, four-year college last year, including living expenses, was $14,333, ac-cording to the College Board. That means it costs more than $57,000 to send a student away to college for four years at a typical state school, up from an inflation-adjusted $28,000 three decades ago. Costs at most Alabama colleges are comparable to the national average, or slightly lower.

Over the same three decades in which costs have doubled, only the rich have seen their incomes come close to keeping pace. For the poorest 20 percent of U.S. families, household income rose 3 percent, and for the middle 20 per-cent, it rose 22 percent. For the richest families, income rose 86 percent, according to U.S. Census Bureau data.

The result, according to financial planners, collegeaid administrators and students themselves, is that paying for college has become something akin to putting together a jigsaw puzzle. Where a generation ago a job and help from the parents might have been enough, middle- and working-class students today routinely need multiple jobs and a combina-tion of government grants, loans and help from family to pay for school.

''It's been much harder than I thought it would be,'' said Whitney Miller, a 25-year-old student at the University of Alabama.

High costs, hard times

The higher cost of college this year has combined with the tumultuous economy to hit students with a double-whammy. Even as the cost of college rises - tuition and fees at UA and at the University of Alabama at Birmingham are going up 9.4 percent this year, while they are going up 7 percent at Auburn University - families' college funds have been decimated by the market collapse.

Alabama's state-run prepaid tuition program, which many thought of as a safety net, is in danger of failure, for ex-ample. That leaves many students with just one option, said Bob Straka, a Birmingham financial planner. ''You've got to borrow money.''

And borrow they have. In total, students nationwide borrowed $85 billion in 2008, up from $41 billion 10 years earlier, according to The Project on Student Debt, a nonprofit advocacy group.

Nationally, just more than half of all undergraduates have student loans. But in Alabama, according to the organi-zation's data, 61 percent of students who graduated last year did so in debt, with the average college graduate in that class owing $20,921.

The most indebted graduates among public and private, nonprofit four-year colleges in the state are graduates of Tuskegee University, according to The Project's data. More than 90 percent of Tuskegee graduates leave the historically black college in debt, with an average of $30,000 in
outstanding loans, nearly twice the debt of the typical student at UA, where graduates owe an average of $17,146. At Auburn, graduates average $25,176 in debt, and at UAB they average $17,650.

Most of that debt comes in the form of government loans, but it increasingly is
private debt, too. Last year, 14 percent of all undergraduate students had taken out more costly private loans to pay for school, up from 5 percent in the 2003-04 school year.

For those with loans, the economic crisis has created an opportunity, Straka said. The typical variable rate for Staf-ford and Loan Plus loans - common student loans - last week was at 1.88 percent. Those loans can be consolidated into fixed-rate loans at about 2.5 percent, in a hedge against rate increases, he said.

''People should fix their loans right now,'' said Straka, who worked his way through the University of Minnesota selling hot dogs at Minnesota Twins games.

Nearly everyone agrees that the rising cost of college is a problem, although there is disagreement over what's to blame. Economists have pointed to a combination of factors, including declining state appropriations and increasing salaries on campus.

In his book ''Tuition Rising: Why College Costs So Much,'' Cornell University economist Ronald G. Ehrenberg blamed a sort of arms race among universities to build the best facilities and have the best sports teams. Capital expenditures are the biggest culprit, he found.

Unexpected expenses

Miller, the UA student, enrolled this year with a better idea of the cost of school than most. She already had earned an undergraduate degree from UA in marketing, but had decided she wanted to earn a master's and teach.

Having been through the process just a few years before, she reasoned, she knew what to expect. On the advice of college administrators, she re-enrolled as an undergraduate so she'd qualify for more aid while she picked up some needed education classes, and she counted on easily finding a part-time job in Tuscaloosa.

But she was surprised by hundreds of dollars in incidental expenses, including everything from copying fees to parking, and found the college-town job market saturated by people who had been laid off by electronics manufacturer JVC or had their hours cut at the Mercedes-Benz or Goodyear Tire Co. plants.

Federal loans cover her tuition and fees, she said, but she has accumulated $4,500 in credit card debt and is getting help from family.

Last week she began a part-time job on campus, but she's still pinching pennies to get by. Finally, she had to tap into savings she had hoped to use for a trip to Italy.

''It was supposed to be fun money,'' she said, ''but it ended up being money that kept me out of trouble.''

Carter, the UAB student, isn't selling his blood anymore. He found a part-time job, earning as much as $18 an hour as a stagehand at the Birmingham-Jefferson Convention Complex and at the Verizon Wireless Music Center at Oak Mountain.

Like many cost-conscious students, he lives at home to save money. His college education so far has cost $20,000, he estimates, with $8,000 coming from money he has earned.
His mother and his stepfather contribute, too, typically by putting expenses on a credit card with a low teaser rate, then trying to pay off the card before the rate rises.

Two things, in particular, have helped him meet his obligations and stay in school, he said. One was a used car he got as a gift, enabling him to hold down a part-time job and get to class. The other?

''It helps to be an only child.''
EMAIL: sdiel@bhamnews.com
TIPS FOR PROSPECTIVE STUDENTS AND THEIR FAMILIES
Make an appointment with the financial aid office at the colleges you're considering attending and sit down with a university aid official to talk about what assistance you can get.
Fill out the federal government's FASFA form, which can be found at www.fafsa.ed.gov. The form goes into a fed-eral database that can be accessed by every college, and it is used as an application for a number of state and federal aid programs.
Determine whether you qualify for a Pell Grant. The grants are need-based, and funding has increased under the Obama administration. Last year the most a student could get was $4,731 a semester; today it is $5,350. The FASFA form is used in Pell Grant applications.
If you must borrow money, remember that government loans typically have better rates than do private ones. About a quarter of students with private loans didn't even apply for cheaper government loans last year. The amount available for Stafford Loans, a common government loan available to most students, has not increased this year. The most a freshman can borrow is $5,500.
Local civic organizations often offer scholarships that are sometimes overlooked. Call and ask what they offer and how to apply. Ask your parents and their friends and business associates whether they belong to civic organizations that offer scholarships.
Keep a calendar that lists deadlines for scholarship applications - and don't miss them.
If you're a parent who's saving for a child who is 10 years old or older, consider increasing the amount you set aside to make up for the market losses.
Don't wait until a child is born to start saving for college. The sooner you start, the less you'll have to set aside each week.
Sources: Tim Vick, head of financial aid services for the Alabama Commission on Higher Education; Helen Allen, associate director of the financial aid office at the University of Alabama; Bob Straka, president of Grandview Financial Group.

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