College Debt Is a Growing Burden for Families : Education: Californians lead nation in borrowing last year with $1.9 billion. Report expects problem to get worse as costs escalate and financial aid is cut.

Borrowing to pay for college is increasing dramatically--nearly three times faster than college costs and four times faster than personal incomes--and Californians borrow more than families and students in any other state, according to a report released Thursday.

Two-thirds of borrowers say their college loan payments represent a major financial hardship, the report said. But because of the enormous value Americans place on higher education, the report predicts that college-related debt will double from $24 billion this year to $50 billion by 2000.

Borrowing among Californians has risen 75% in four years, the report found. In 1990, student loans in California amounted to just over $1 billion. Last year, Californians borrowed $1.9 billion to pay for their undergraduate educations.

The report, “College Debt and the American Family,” puts the average debt level per graduating college student at less than $10,000. But borrowing levels among students and their parents are increasing swiftly, especially among nonwhite and older students, and there is no end in sight, the report said.

Loans have become increasingly important to students in recent years because other forms of financial aid have either been eliminated or have not kept pace with soaring college costs.

Also, in 1992 the federal government made it easier to obtain government-backed loans by relaxing eligibility requirements while raising the amount that students and their parents could borrow each year.

But the loan boom threatens to undermine the future financial well-being of college graduates by saddling them with years of payments that critics worry will limit their choices about career and lifestyle, said Ted Freeman, president of the Boston-based Education Resources Institute, who compiled the report in cooperation with the Institute for Higher Education Policy in Washington, D.C.

He offered this example: Six months after they graduate, students who have borrowed $10,000 must begin making monthly payments of about $250.

“The person who went to school and became a social worker or a teacher, even if they just come out with $10,000 in total debt, they’re going to really struggle,” Freeman said. “That has an adverse impact on their lifestyle.”

Freeman said his organization is also concerned about the huge debt that many parents are incurring to finance their children’s schooling. On average, he said, parents of undergraduates are borrowing about $8,000 per year--or about $32,000 for a four-year college education.

“We are burdening lower-income families and students with loans. Maybe the students will be able to repay that loan and better their lifestyle, but maybe not,” he said.

Parents, meanwhile, are spending money they might have saved for retirement in order to finance college debt.

In a survey of 373 adults in 45 states that aimed to gauge the effects of college debt on the lives of students and their families, the report found that 87% believe that college costs would soon rise too high for most people to afford, and 52% said that any additional debt of major expense would pose a serious financial risk to their household.

“At what point does the willingness to sacrifice get overtaken by the crushing reality of debt loads that inhibit other economic activities?” the report asked. “This point may come sooner than we think.”

The solution, Freeman said, is more grant money for students. But he acknowledged that there appears to be little support in Congress for such a project. Already, lawmakers have agreed to cut the $25-billion federal loan program’s funding by more than one-third.

Sen. Nancy Landon Kassebaum (R-Kan.) has recently proposed several more trims, including adding a 2% charge to colleges and universities on all federal loans their students receive.