Four years at a public university, including room and board, costs an average of $57,332, according to the College Board. The average tab for a private university is $136,528. Yet the maximum that can be borrowed under the federal loan program is $31,000.
High-cost private loans fill that gap. One result is that students now average nearly $20,000 in debt by the time they graduate, twice as much as a decade ago.
For The Record
Los Angeles Times Tuesday, January 20, 2009 Home Edition Main News Part A Page 2 National Desk 2 inches; 72 words Type of Material: Correction
College loans: A Dec. 27 article in Section A about the costs of college loans said lawyer Marja Lopees spends about 40% of what she makes to pay off her student loans, including $88,303 she accrued in private loans. Lopees said her debt burden has lessened since she was interviewed and she no longer spends 40% of her income on her debt, but she declined to provide current income or debt figures.
"There is an alignment of interests that lead students to take out larger and larger amounts of debt," said Luke Swarthout, a former higher education advocate at the U.S. Public Interest Research Group in Washington.
"The students think it's an investment in their future, and the colleges are willing to let them borrow heavily because it helps them fill in their enrollment."
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In the dark
Hickey knew she would need loans to complete her degree, so she went to the campus financial aid office as a freshman. After she filled out paperwork, Brooks Institute set her up in a loan program administered by Sallie Mae, the nation's biggest student lender.
Sallie Mae was chartered by the federal government in 1972, and most of its business is in issuing federally insured student loans. But while it may appear to be a quasi-government agency, it is in fact a for-profit company whose stock trades on the New York Stock Exchange.
Hickey ended up with $20,000 in low-interest federally guaranteed loans issued by Sallie Mae, and $120,000 in higher-interest private loans issued by Sallie Mae.
Hickey said no one explained the difference to her.
"The financial aid officer just said that my federal loans weren't enough to pay the tuition, but that was OK because they had these great alternative loans," Hickey said. "They made it sound so good that I didn't ask that many questions."
Tim Halsey, vice president of finance for Brooks Institute, declined to discuss Hickey's case directly, citing federal privacy laws. But he said the school's financial aid officers take great pains to explain the differences between loans and to guide students to the best deals.
"It is really to our advantage to get the loans and interest rates as low as possible," Halsey said.
"My motivation is to get that person to come to the school, if that's what they want to do. If I can get those costs as low as possible, it benefits us both."
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Spotty disclosure
