The Soaring Popularity of College Student Loans

(MoneyWatch)  This is going to be hard to believe, but in the mid 1990s most students did not borrow money for college.

In 1993, just 32 percent of students took out a college loan. In every year since then, however, the numbers have continued to climb. According to a report released today by the Education Sector, 53% of undergrads at four- and two-year institutions relied on student loans for the 2007-2008 school year.

Why are the majority of students now going into hock to pay for college? Two obvious culprits are runaway tuition and dwindling need-based financial aid. But here's another reason that will surprise you: states and universities have been handing out more cash awards to affluent students rather than giving it to kids who truly need it. I mention this phenomenon and how to take advantage of it in a package of CBSMoneyWatch stories that's entitled, How Rich Kids Get College Aid.

What the Education Sector also found alarming was the source of more student loans. Private loans have mushroomed into a go-to-place for cash for a growing number of undergrads. While private students loans don't offer terms that are as outrageous as Shylock's, you should try to avoid them.

If you need to borrow for college, considering using a home equity line of credit as well as federal student loans.

Money image by Borman818.