Rise in Student Loans Reflects U.S. Trend : Education: Borrowing to keep pace with soaring costs increased 40% in California to $1.69 billion in past school year.

Borrowing to pay for college is rising dramatically across the country, with more students assuming more debt than ever before, according to a preliminary report released Wednesday by the American Council on Education.

Based on a survey of more than 300 institutions of higher learning, the report found that from July, 1993, through June, 1994, the nation’s students and parents borrowed 41% more than during the previous 12-month period. Borrowing in California mirrored that trend, rising 40% over the same period to $1.69 billion.

“To our knowledge, this is the biggest jump that we’ve seen in history,” said David Merkowitz, a spokesman for the American Council on Education, who lamented “a breaking of the traditional bargain in higher education: that the current generation will help pay for the education of the next generation.”

“The costs keep going up, but the grant money hasn’t gone up,” said Phyllis Coldiron, director of financial aid at Chapman University in Orange, which mirrors the nationwide trend. “Because the grant money has been static, the gap has to be filled with loans or an institution’s funds.”

Patrick Callan, executive director of the California Higher Education Policy Center, called the report’s findings “cause for significant concern.”

“It’s a major structural change in the way we pay for college in the United States,” Callan said.

Although the report could not determine the average debt level per student, analysts speculated that it, too, is rising sharply. They warned that once today’s students graduate and begin trying to repay their loans, indebtedness will force them to make choices they might not otherwise make.

“What kinds of decisions will these people make about graduate school if they already have huge debts? Will they (feel free to) choose low-paying professions like teaching? Will they be able to buy houses or cars? What will be the effect on the economy?” asked Merkowitz, who said growing student debt has “very severe implications for the future of this country.”

In recent years, loans have become increasingly important to students because other forms of financial aid have not kept pace with soaring college costs. In addition, the federal government last year made it easier to borrow money by relaxing eligibility requirements while raising the amount students could borrow each year. The result: a national borrowing boom.

“Of the 75 million loans made since the original guaranteed student loan program started in 1966, 16% were made in the last two years,” said Fred Galloway, the American Council on Education’s director of federal policy analysis. “Furthermore, of the $183 billion borrowed in the nearly 30-year history of the program, 22% was borrowed in the last two years.”

California is experiencing a record borrowing surge as well. During the 12 months ending in June, 1994, borrowing increased 65% among California State University students--the first time that Cal State had outpaced the University of California in loan volume. Cal State Fullerton kept pace; its undergraduate and graduate students borrowed about $16.2 million in 1993-94 compared to almost $9.9 million in 1992-93--a 64% increase.

Students attending the UC system borrowed 54% more than they had the previous academic year, while the number of loans increased 36% at community colleges. Borrowing by students at private colleges and universities in California rose 47%.

UC Irvine students borrowed about $24.6 million in federal loans in 1993-94, a 39% increase over the $17.7 million they borrowed the year before, said Kimberly Hart, coordinator of university programs in the student financial support office of the UC Office of the President.

“The limits on how much students can borrow have grown,” Hart said. “Students are going for those extra loan dollars.”

Students at Chapman University in Orange took out $9.6 million in federal loans in 1993-94, a 68% increase over the year before.

Times staff writer Alicia Di Rado contributed to this report.