Luis Fernandez, who will graduate in May from Cal State Fullerton, put himself through college and has a stack of receipts to prove it. He paid for his education, all $12,800 of it, in cash.
“My parents have always said, ‘If you don’t have the money to pay for it, then work for it,’ ” Fernandez said.
So he did. Fernandez, 24, who came from Mexico with his parents when he was 8, worked at a Westminster drugstore and wrote personal checks to cover his college fees. He decided not to take out student loans.
Although the pay-as-you-go method worked for Fernandez, one of his teachers, Chicano studies professor Alexandro Gradilla, has seen many Latinos drop out or take extra years to graduate because they won’t finance their education the way most college students do: with a combination of work, grants and loans.
“I see this happen all the time in my classroom, students who are overworked and under-prepared for class,” said Gradilla. “When I ask them about taking out loans instead of working so much, their thinking is, ‘If you can’t pay it in cash, then it’s not a good idea.’ ”
Educators and financial aid experts said the cultural aversion to loans -- considered a sign of a strong work ethic -- is common among Latino immigrants and their children. And it creates an odd dilemma in academia.
Financial aid experts worry that students who rely heavily on loans are taking on too much personal debt to pay for college, but educators are trying to convince Latinos that school loans, if used wisely, can lead to high-paying jobs later.
Another of Gradilla’s students, ethnic studies major Juan Coronel, said he noticed the trend while working part time as a teller at Banco Popular in Montebello.
“The majority of Mexican clients we had, I noticed, liked to pay in cash,” said Coronel, 22. “They were insecure about credit or borrowing, as they thought fraud would be a possibility. I think we learned that from our parents.”
Coronel hasn’t taken out any loans either.
Students, professors, researchers and loan providers cited three common reasons for the aversion to loans: lack of knowledge about financial aid, fear of debt and distrust of lenders.
For immigrants, that distrust is rooted in bad experiences with government-backed financial institutions in their home countries. Also, some students and parents might be reluctant to seek aid because they are undocumented immigrants.
Researchers said the loan phobia isn’t limited to the Latino community but is a common apprehension among students from low-income, immigrant, or first-generation college backgrounds.
“It’s not an us-versus-them mentality,” said Deborah Santiago, vice president for policy and research for Excelencia in Education, a nonprofit based in Washington, D.C., that aspires to help Latinos get through college. “But the reluctance to take out loans, specifically federal ones, is definitely an issue for Latinos.”
According to federal data studied by Santiago, Latinos are less likely to take out loans than whites, blacks and undergraduates in general. The percentage of Asians seeking loans is even less than among Latinos -- 24.8% compared with 29.8% -- but their need for loans is somewhat diminished because they tend to receive more scholarships and financial aid than other groups, she said.
A 2004 study by USC’s Tomas Rivera Policy Institute found that 80% of Latino parents and 74% of college-age Latinos did not cite loans as possible sources of financial aid.
“Many Latinos would rather make their college choices based on their current economic situation and what they can afford while managing family and personal responsibilities,” said Santiago.
“They would rather pay as they go and honestly believe they can get a quality education wherever they enroll, as long as they are motivated,” she said.
Some Latino students stay with their parents to save money, but Santiago said living at home can cut into students’ study time and money. Coronel sympathizes. He lives at home in Pico Rivera and contributes about 25% of his paychecks, about $500 a month, to help pay family bills.
So some students adjust their goals and their payment strategies. Another Fullerton student, Cassandra Flores, 21, gave up her dream of attending a University of California campus because she didn’t want loans. She sometimes uses credit cards to pay for what scholarships don’t cover.
“I pay off my credit cards every month, even if it means that I’m broke and need to use them again because I paid them off and don’t have any money left over,” Flores said.
The pay-as-you-go method works for some students, but others become what educators call “stop outs.” When cash runs out, those students halt their studies while earning more, sometimes prolonging their undergraduate studies for years.
“In focus groups with Latino students, students said they are reluctant to take out loans because they will have to pay them back [even] if they don’t complete and don’t think they can afford to take the chance,” Santiago said.
Latinos borrow the least of all undergraduates by race or ethnicity, around $5,620 for up to four years, according to Santiago’s study of the latest figures from the National Center for Education Statistics.
Federal loans constitute 51% of the aid granted to all undergraduate and graduate students, according to a 2006 College Board report.
The College Board also found that the median amount of debt for a bachelor’s degree recipient was $19,300, which does not include private loans or credit cards, for the 2003-04 academic year. But debt burdens topping $30,000 are not unusual, the report said.
Recognizing that financial aid is a stumbling block for Latinos, the Sallie Mae Fund three years ago launched a bilingual “How to Pay for College” national bus tour. The bus travels to low-income, predominantly Latino schools to inform students and parents about college financing.
On a recent Tuesday morning, the tour went to Sacramento High School in Sacramento, where 300 juniors listened to a presentation and then easily answered questions about getting into college -- until the first question about loans.
“What are the names of the two federal loans I mentioned during my presentation?” asked Lilyan Prado, 27, the bus tour’s charismatic director.
Silence settled in the auditorium as the students -- who earlier had clamored to answer questions to win T-shirts -- fumbled through a 36-page handout for the answer.
Finally, a student in the back said, “Perkins and Stafford,” ending the longest silence during Prado’s half-hour presentation. It’s that silence that worries Prado.
“Bridging the gap between Latinos and other groups in access to higher education concerns everyone as the population grows,” said Prado, whose bus tour will visit Los Angeles Friday through Monday. “It’s critical to the future of our country and its success.”
In L.A., the tour will visit schools in Athens, downtown, Boyle Heights and Van Nuys. The fund’s website is www.thesalliemaefund.org.
Prado handed out copies of a book listing scholarship opportunities but later expressed frustration that some Latinos won’t apply. She said many assume they don’t stand a chance of winning one.
Grants and scholarships are preferable to loans, said Kent Kostka, a University of Texas attorney and coauthor of a report on financial aid strategy for the U.S. secretary of Education.
“If your goal is to help poor kids go to college, loans aren’t the way to go,” Kostka said. “The federal government is eventually going to have step up and provide more aid if they want to fix this.”
Santiago, of Excelencia in Education, added that colleges and universities could also offer a financial incentive program for continuously enrolled students, who graduate at higher rates than “stop outs.”
“Our research shows that even just a $150 credit a semester would be enough to keep pay-as-you-go students from dropping out,” Santiago said.
“These students are trying to have it all -- a family, an education, achieving the American dream -- and it’s hard to balance that,” she said.
Some students are reconciling themselves to debt. Fernandez, who will get his degree in English literature and Chicano studies, said he realizes he’ll need a loan for graduate school.
So does Coronel, who finds humor in taking out his first loan for graduate school: “My accounting professor put it best. He said, ‘If you’re not in debt, you’re not American.’ ”
Begin text of infobox
35% - U.S. undergraduates with college loans
29.8% - U.S. Latinos with college loans
29% - People ages 25 to 29 with bachelor’s degree or higher nationwide
11% - Latinos ages 25 to 29 with such degrees nationwide
Sources: U.S. Census Bureau, Department of Education, Tomas Rivera Policy Institute