When Melissa Castaneda took out a loan from Bank of America three years ago to help pay her tuition, she didn’t know the difference between a federal and private loan. It was a technicality that cost her.

Because the loan wasn’t subsidized, Castaneda now struggles to work full-time and be a full-time student.

‘I don’t want to continue making payments all of my life, I don’t want to be in debt forever,’ said Castaneda, a 21-year-old junior liberal studies major, who is among the two-thirds of all four-year college students nationwide who have taken out a loan according to a recent study, conducted by The Institute for College Access and Success (TICAS).

The institute’s Project on Student Debt shows that over the past decade the amount of graduating seniors’ loan debt increased to 108 percent nationally.’

Approximately 54 percent of CSUN students have taken out federal loans, according to Gregorio Alcantar, a financial aid advisor.

‘I believe students who were recently laid off and depended on that income may have to rely more on financial aid to meet their expenses,’ said Alcantar, who believes more students will take out loans after the unemployment rate increases and Cal Grant funds are reduced.

‘Students who did not have the need to borrow student loans may now have to borrow to meet their needs.’

About 20 percent of all private loans are being used nationwide by four-year college undergraduates, graduate students and parent loans found the institute.

Although federal loans are available for students who fill out their FAFSA regardless of their income, government representatives are considering raising the amount students can borrow, according to Edie Irons, TICAS communications director.

Irons believes the government should step in and rescue the students. Adding that financial aid is attractive to students who want to avoid taking out a federal loan, much less a private loan.

‘Private loans are easier to get because you don’t have to fill out the FAFSA, which can seem complicated for students,’ said Iron.

‘There are lots of students who are missing safer and cheaper options,’ said Iron before adding that almost half of students who have taken out private loans are eligible for federal loans. ‘Private loans should be a last resort because they can be so risky.’
Irons’ belief is that many students do not understand the difference between federal and private loans.

‘A lot of students don’t understand,’ Irons said. ‘If you’re 18, you haven’t had much experience dealing with the difference between subsidized loans or unsubsidized or interest rates. They’re not reading all the fine print.’

Taking out a private loan was easy and it didn’t matter where it came from, said Castaneda. However, she now realizes her mistake in taking out the loan and rather work for her money.’

In 2002, 45 percent of students who look back at all the money they borrowed report they would have borrowed less. Alcantar believes that students can learn to avoid borrowing fewer amounts of loans if students learn to budget themselves.

During the past five years tuition and fees at public universities have risen by 57% nationally. This semester, students did get the money they were promised by Cal Grant if they were eligible but the payments were delayed due to a lack of funding from the state.

While a recent report made by the California Faculty Association, shows that nearly 2.6 million Californian undergraduate students faced an average of $1,723 per student. Tution and fees at public universities have risen 57 percent nationally. Even though eligible students get money from Cal Grants, the payments were delayed due to a lack of state funding.

Yvonne Stewart-Buchen, spokesperson for the California Student Aid Commission (CSAC), said she doesn’t know what the 2009- 2010 budget will be for the Cal Grant and that it all depends on what Gov. Schwarzenegger presents.

For more cost saving tips check the Sundollar at http://apps.sundial.csun.edu/sundollar/