College-financing options blossom. Among them: job tie-ins, prepayments, more aid

Augustana College in Sioux Falls, S.D., is the proud owner and operator of a bank. Through a gift of shares of stock, this liberal arts college took controlling interest in the State Bank of Hendricks in Hendricks, Minn., in June of 1983. College officials expect an eventual sale of the bank to result in a nice boost in the school's endowment fund.

Ownership of a bank is not common among the nation's colleges and universities. Yet a growing number of schools are offering students and parents financing options for tuition costs that resemble financial programs offered by a bank. Other schools are coming up with interesting employment opportunities to help students ''work off'' some of their debt. And the number of schools awarding scholarships on the basis of merit, rather than just need, continues to rise.

All of these developments are part of a sustained blossoming in the number and kinds of options that colleges are coming up with to help families pay the high cost of a college education. The activity reflects a conviction on the part of institutions of higher education that middle- and even many upper-middle-income families need some kind of assistance in paying the college bill.

Among the developments:

* The University of Pennsylvania has begun a program that offers a wide range of financing possibilities, including paying tuition over a 10-year period, paying a year's expenses in monthly installments, and prepaying four years' tuition at the current year's rate. The program, called the ''Penn Plan,'' is attracting great interest from other schools.

* Drury College in Springfield, Mo., will automatically match any scholarship based on academic achievement which a student receives from an outside source. In 1983 the school gave out almost $17,000 as part of that program.

* And Cornell University in Ithaca, N.Y., is in the second year of a financial aid plan, dubbed the ''Cornell Tradition,'' that includes grants and employment among Cornell alumni to students who demonstrate a respect for the work ethic. The program includes grants of up to $2,000 a year, and a subsidy from Cornell for career-oriented jobs of up to two-thirds of the student's salary. This can reduce the four-year debt by as much as $8,000.

''We're into a whole new ball game'' in college education financing, says Philip Wick, director of financial aid at Williams College in Williamstown, Mass. ''The rules, opportunities, and options are changing daily - and that's extremely confusing to parents.''

According to Robert Leider, author of a number of publications on how to pay the education bill, colleges began branching out from the traditional twice-yearly tuition payment plan shortly after President Reagan ''scared them into taking action'' with talk of deep cuts in federal student loans. Although Congress never went along fully with Mr. Reagan's plans, heightened concern ''forced colleges to begin looking at the kinds of options they might offer,'' Mr. Leider adds.

Speaking of the decision by colleges to become more involved in education financing, Katherine Hanson, executive director of the Consortium on Financing Higher Education, says, ''It's that philosophical change that has been the great development in the past two years.''

Yet Mrs. Hanson says that despite the plethora of options being touted by various schools, there are three basic categories of ''creativity'': the institution itself providing access to loan equity at better than commercial rates; the ''master card'' approach, with the school allowing expenses to be paid in installments; and the college providing ways for students to supplement their income through work opportunities ''that make sense.''

To that list, Leider would add the ''incredible'' increase in academic scholarships. A survey he completed in July shows that some 1,100 colleges offer scholarships based on academic merit, up from 980 a year ago. Since the '60s most schools have included financial need as a criterion in all scholarship awards. Many educators oppose merit scholarships because of the competition, or interschool ''bidding,'' they can bring into selection of a college.

Yet in spite of the seeming complexity of financing options and the apparent confusion it has caused, many students and parents are quickly adapting to the new programs schools are offering.

Frank Claus, director of the Penn Plan, says that this fall - the plan's first operating year - about 1,000 of the University of Pennsylvania's 2,100 freshmen will have some participation in the plan. He says about 400 have chosen to pay for each year in 10 monthly installments, while more than 250 will pay for four years of tuition at this year's rate - $9,600 a year, or $38,400 - over 10 years and at a fixed rate of 10 percent.

This latter plan, which eliminates uncertainty over the high inflation rate in higher education and offers tax advantages, was first offered six years ago by Washington University in St. Louis. It has now been picked up by scores of other schools.

And at Cornell, participation continues to grow in all segments of the Cornell Tradition; 700 students took part last year. James Scannell, director of financial aid, says 570 students were placed in jobs this summer, up from 420 a year ago. This summer's workers will reduce their cumulative debt by more than $ 1 million, he estimates. In addition, 125 freshmen will enter Cornell this fall with grants through the program.

Other colleges continue to add programs. Bowdoin College in Brunswick, Maine, is just now processing the first loans under a program that allows the borrower up to $10,000 a year. According to Walter Moulton, Bowdoin's director of student aid, the program calls for repayment over 14 years: payments on interest (113/4 percent) during the four years of education, then on principal and interest for the next 10 years.

Hartwick College in Oneonta, N.Y., has begun a loan plan, called the Parent Aid Loan (PAL), which allows parents to pay back only half of the principal if it is repaid within six months of the student's graduation. At the program's loan maximum of $3,000, the borrower only pays back $1,500, plus interest of 9 percent.

The great majority of the new payment options are coming from private colleges. As author Leider points out, their independence means they can respond more quickly than state institutions to changes in financing methods and loan availability. ''It's also simply because they cost more,'' he adds.

But some public colleges are also coming up with plans to help finance education.

In Allendale, Mich., for example, Grand Valley State College has started a deferred tuition payment plan, even though the school's $1,502 annual tuition may seem minimal when compared with private schools.

According to Kenneth Fridsma, the school's director of financial aid, Grand Valley has also recently begun awarding about $500,000 annually in merit scholarships. The 7,000-student school is also developing a computer program that will help area families understand college education financing and financial aid options.