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With Rising Tuition, More Students Begin Footing College Bills

By Jonathan D. Glater

Alexandra Baldari and her parents have talked a good deal over the past year about how to pay for her college education, and the upshot is this: If she enrolls at the University of Miami in the fall, she will bear much of the cost, which could total $40,000 or more a year, on her own.

“The problem here,” said Baldari, who lives in Parkland, Fla. “is I’m 18 and looking to go to college, and my parents are looking to retire.”

Baldari’s parents earn about $100,000, but her mother, Anne Angelopoulos, said there was not much left after paying for housing, three cars, gas, food and utilities, and trying to save for their 11-year-old son’s education. Baldari’s parents prepaid for her to attend a public university in Florida, but she does not want to go to a public institution. The Florida Prepaid College Program locks in the cost of college in the future by prepaying at today’s prices.

“We did in fact plan for this and anticipate this and have it covered, in our opinion, but she has made a choice,” Angelopoulos said, adding that the prepaid money could be applied to tuition at a private school but would not cover all of it. She said that while the family was trying to come up with ways to reduce how much their daughter would have to borrow, they did not see how they could take on more debt themselves. “This is where we draw the line.”

More middle- and upper-middle-class parents are drawing similar lines. While financing higher education has long been a strain, parents seem willing to pass more of the burden on to their children, financial aid officers say. Many are worried about retirement and say their fixed costs eat up their income. Others have not saved enough or are helping pay for care for their aging parents.

“What I’ve really seen in the last 10 years is a generational shifting of the responsibility” to pay for college, said Ellen Frishberg, director of student financial services at Johns Hopkins University in Baltimore. “Our parents helped us pay for school. These parents are not as willing to help their children pay for school.”

There are no data directly measuring who bears the cost of college. But financial aid officers at institutions from Johns Hopkins to the University of California, Los Angeles, say they have observed a shift in recent years.

Tuition and fees at many colleges have long exceeded the amount students are permitted to borrow for college costs under the federal loan programs. Parents, however, can borrow up to the cost of attendance under federal programs, known as PLUS loans.

Although the aggregate volume of federal loans to parents has risen over time, it is far outstripped by the total of private loans for education from banks, the number of which has increased steeply. Private lending is the fastest-growing piece of higher education finance and, responding to demand, more banks are expanding their offerings.

In 2004–05, there were $13.8 billion in private loans for graduate and undergraduate education, up from $10.4 billion the previous school year. Meanwhile, the amount of parental PLUS loans, which 10 years ago was nearly double that of private loans, totaled $8.4 billion in 2004-05. This is true even though private loans typically have less generous terms than federal government loans do: higher interest rates, and interest that accrues even while the student is still in college, for example.

Although there are no statistics on whether those taking out private loans are students or parents, financial aid officers said it seemed unlikely that parents could account for all of the increased private borrowing because they could get more favorable rates under the government program. And they fear that after graduation students may be left with onerous debt burdens.

Still, some students say they are unwilling to let financial constraints dictate where they go to college. Thomas W. Dillon, 20, of Warwick, R.I., decided to go to the University of Connecticut over the University of Rhode Island, where his parents would have covered tuition, and faces tens of thousands of dollars in debt.

“The way I see it is, I only get to go to college once,” Dillon said. “If I have to pay an extra $20,000 a year, that’s what I have to do.”

Some parents may ask their children to borrow for their higher education but then assist them in the repayment, but that is difficult to discern. And the pattern is not evident at elite institutions like Harvard and MIT. Officials at these colleges suggest that parents may view the cost of tuition there as worth any sacrifice.

“It’s such a new phenomenon that there’s not a lot to compare it to,” said Christine W. McGuire, director of financial assistance at Boston University.

She said changing attitudes about debt were behind the trend. “We’re so comfortable with debt burden now as a society, and the parents already have a significant debt burden of their own, they may not see it as a big deal if students are also taking on large amounts of debt.”

Angelopoulos said she had consulted with a financial adviser.

“I want to do whatever I can to send her to the college she wants to go to,” she said. The advice? “She told me the best thing you can do is have money to retire,” Angelopoulos said, to avoid being a burden on her daughter.

Dillon’s father, Thomas J. Dillon, who makes more than $100,000 a year as a vice president at a software company, spoke with his four children about their college options. There was no choice really, he said, because paying for all four to go to private institutions could cost more than $600,000, and Dillon still has tens of thousands of dollars in student debt from his own law school education.

“We basically did two things,” he said. “One is we said to them, if you go to the University of Rhode Island, which is a state school, here’s what we would pay.” But if any chose to go to another college, as his eldest son did when he picked the University of Connecticut, their parents would contribute only as much as they would have paid for in-state public university tuition, he said.

Concern about higher interest rates and other burdens of private loans on borrowers has led Carleton College in Northfield, Minn., through the Associated Colleges of the Midwest consortium, to try to negotiate with lenders for better terms for their students, said Rod Oto, director of student financial services and associate dean of admissions at Carleton. “Our thinking was, joining together we might have a little bit more leverage.”

To take advantage of growing demand, big banks are expanding student loan operations. Chase recently bought Collegiate Funding Services, an education finance company based in Fredericksburg, Va., to be able to service student loans directly, sending out collection notices, processing payments and the like.

“We’re viewing it as a very important segment for us,” said Brad Conner, an executive vice president. “It certainly is one of the fastest-growing.”