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02/22/94

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Stanford student loan increases part of national trend

STANFORD -- Relaxation of federal lending rules has led to a nationwide jump in student borrowing this year, and Stanford University is no exception.

According to Diana Netherton, staff analyst at the California Student Aid Commission, Stanford students and their parents have taken out 1,918 commission-guaranteed loans for about $8 million in the first half of fiscal year 1993-94. That is more than for all of 1992-93, when there were 1,814 loans for $5.5 million. (Such loans represent about 85 percent of all student borrowing at Stanford.)

In 1991-92, she said, Stanford students took out 1,611 commission-guaranteed loans for $5 million, and in 1990-91 they took out 1,053 loans for $3.3 million.

"Stanford isn't unusual," said Netherton, whose Sacramento-based agency administers guaranteed student loan programs in California for the federal government. "This is program- wide."

Last week, the commission reported that California students and their parents borrowed 50 percent more money for college this school year, taking out a record $1.2 billion in loans. Student borrowing is expected to reach at least $1.7 billion in the state by the end of the school year, the commission said.

Probably the main reason for the increased borrowing is the Higher Education Reauthorization Act of 1992, which raised loan limits this year and made it easier for more middle-class families to borrow money for college.

Among other things, the act said that the value of a family's house or farm would no longer be considered as an asset in calculating a student's need. This qualified many new students - particularly in California, where real-estate values are high - for guaranteed loans on which the federal government pays interest on the debt until the student leaves school.

Congress also created a new kind of "unsubsidized" loan for higher-income families, on which interest accrues while the student is still in school.

So far this year, Netherton said, 136 of these "Stafford Unsubsidized Loans" have been taken out by Stanford families, for a total of $417,471.

Although final figures are not available, Stanford Financial Aids Director Robert Huff acknowledges the upward trend.

"Before, students had to demonstrate need to get low- interest federal loans," he said. "Now, anybody can borrow."

The flip side, of course, is the uncertainty that debt brings for the borrowers.

"It [the guaranteed loan program] does make it easier for me while I'm in school. I'm working less now than I was as a freshman, and my grades have gone up, so that is definitely a benefit," said Terry O'Day, a junior majoring in public policy who has worked and borrowed extensively to finance his Stanford education.

"Still," he said, "I think a lot of students are stressed out about receiving so much money in loans that will have to be paid off in the future, particularly students who are not in computer science or engineering - students in majors that don't really offer the security of a position when they graduate. In a lot of cases, it deters students from going into those fields."

Day himself is not sure what he'll be doing after graduation - possibly something in the area of community service.

"I only get a six-month grace period [after graduation], and there's absolutely no guarantee that I'll have a stable income or a steady job, or that I'll even be working at all within those six months," he said. "So it's scary in that way, knowing that I'll have well over $10,000 to pay back and no job in sight. It tends to make people a little nervous."

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