By Barb Berggoetz
indystar.com
July 9, 2004

By the end of her junior year at IUPUI, Ashley Nottingham expects to rack up $13,000 in student loans.

"Oh, gosh, I haven't said it aloud yet," she said of the amount. "It's kind of scary."

Nottingham isn't the only Indiana student scared by deepening debt as tuition continues to rise above the rate of inflation. In the struggle to keep up, students are maxing out federal loan options and turning to private lenders or asking their parents to borrow to cover college costs.

Nottingham, 21, works at a florist shop as many as 25 hours a week while going to school full time. On her own since graduating from high school four years ago, Nottingham knows her bachelor's degree in psychology won't get her a job that pays more than $30,000 a year.

Facing federal and private loans that might total $25,000 by graduation, the honor student said she hopes her high grades will earn her scholarships to attend graduate school.

Nottingham is better off than many students -- particularly those earning graduate degrees -- who are saddled with debts of $75,000 or more.

As of July 1, federal student loan rates dropped to the lowest rate in 35 years; some loans are available for as low as 2.77 percent.

But the borrowing limits on federal student loan programs haven't risen for more than a decade. Freshmen, for example, can borrow $2,635.

That's not enough, so parents are borrowing much more -- in the past five years, as much as 87 percent more on average in federal loans for parents sending a child to one of Indiana's four-year public universities, according to financial aid directors.

Other students reaching the federal loan limits are turning to private loans with higher interest rates primarily from banks.

"It just concerns me when I see so many students get into debt that's harder to repay and harder to manage," said Thomas Ratliff, director of student financial aid at Indiana State University.

Although statewide data on private student loans aren't available, a representative of Sallie Mae, the nation's leading provider of education funding , said private loan volume was up 39 percent in 2003, to $3.3 billion out of the total of $15.2 billion.

"We're seeing dramatic growth in the private loan area," said Martha Holler, Sallie Mae spokeswoman. "Students need to supplement (federal loans) with a private loan."

That's not surprising to William Ehrich, associate director of Indiana University's Office of Student Financial Assistance.

"In 1996, we were doing a private loan once a week," he said. "Now, we're doing several hundred a year."

At Purdue University, the total loaned to students by private institutions rose 72 percent in 2002-03 over the previous year.

Still, the federal Stafford loans, the major borrowing program for students, and the smaller federal Perkins loan program account for the bulk of the loans.

Nationally, 65 percent of graduating seniors accumulated federal loan debt averaging $19,300 in 2000, a report by the National Center for Education Statistics showed.

The average federal loan debt was $12,100 in 1993, when 49 percent borrowed.

In Indiana, average debt levels at four-year public universities for graduating seniors were lower than the national average in 2000, the latest year for which statistics are available.

But debt levels for 2003 are edging closer to $20,000 -- with Indiana State University's highest at $19,681 followed by Indiana University's $18,423 and Ball State University's $16,796.

Typically, half or more of college seniors have debt.

Those numbers likely are even higher now.

Tuition at the four-year Indiana universities has risen an average of 20 percent in the past two years, making the annual average $5,792 for next fall.

And the state's financial aid per student was capped last year at $4,700 annually for students going to public universities.

Every day, David Murray sees Hoosiers struggling to pay for college. He's president of the National Center for College Costs in Greencastle, an organization that advises students and families on saving for college.

"I actually see families looking at routinely borrowing $15,000 to $20,000 a year to try to make the numbers work to get into the college they want," Murray said.

A $20,000 federal Stafford loan, for example, with a standard 10-year repayment plan would cost students $197 per month based on the current 3.37 percent interest. Every $1,000 increases the monthly fee by about $10.

Despite Indiana's relatively strong financial aid program, Murray said it's getting tougher for low-income families to send children to college.

More colleges are giving out more merit-based aid, federal Pell grants are stagnant at $4,050 and federal tax credits benefit the middle and upper classes, he said.

While college counselors advise students not to take out too many loans, the debt burden often doesn't sink in until after graduation day.

Scott Smith, 23, graduated from IU in May with a degree in French.

The Valparaiso native must repay $15,000 in loans, but he doesn't have a job now other than painting houses.

Is he worried?

"I guess, a little bit," he said, sitting outside the IU Library. "I don't want to pay them back."

He's thinking about trying to get into law school or perhaps teaching. But Smith, who received one Pell grant, thinks the government should do more to pay for students' educations.

Many financial aid directors in Indiana would agree.

They said the best scenario would be for the federal government to increase the Pell grant, which goes to low-income students. The next-best option, some say, is for Congress to raise the federal loan limits.

While juniors and seniors can borrow $5,500 annually, freshmen are limited to $2,635, and sophomores can borrow $3,500.

"That's way off the mark," said James Patton, financial aid director at the University of Southern Indiana. All students should be able to borrow $5,500 per year, he added.

But college officials worry, too, that raising limits will drive up borrowing.

Indiana financial aid directors say their debt averages are reasonable, yet they recognize some students will have a tough time.

"A kid who owes $40,000 and is going to become a teacher, yes, that's a significant burden," said Robert Zellers, Ball State's director of financial aid.

Jesse Wilson, 27, is looking at loan debt that will total twice that amount, close to $80,000, by the time he graduates from the IU School of Law-Indianapolis next May. The loans include some from Butler University.

"Especially, having a finance degree, I feel the weight of the interest, having that kind of debt."

Yet he's not nervous about paying it off. "I don't think it's that bad of a deal. Even though it's debt, I see it as an investment in my future."

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