New ways to pay for college as costs climb, loans disappear

When Kenneth Klemm called his parents to tell them the exciting news that he had just won a $10,000 college scholarship, it seems that along with their happiness they'd breathe a sigh of relief that their son could now go to the school of his choice.

There was no such sigh. The sky-rocketing cost of college still leaves Kenneth more than $30,000 short of the four years of tuition he needs for any of the three schools he'd like to attend.

Whether President Reagan's proposed student financial aid cuts go through or not, parents and students across the United States are having to rethink how they'll pay for a college education, much as Kenneth and his parents are. Just as the high cost of energy has radically altered American consumption habits, the spiraling costs of higher education mean financing higher education will never be the same again, many financial aid officers say.

An informal survey of some 50 high school student leaders from across the country showed that nearly half of them were considering going to a school other than their first choice for financial reasons. School officials say this is an significant trend. Student council president Natalie Hanlon of Englewood, Colo., will go to University of Colorado in Boulder this fall instead of her first choices, Stanford or Northwestern. She wants to go to law school later. So she'll go to Colorado, pay in-state tuition at a state university, live at home, and commute to school to save even more.

The numbers are staggering. At Harvard University, Bennington College in Vermont, and other top-ranked schools, tuition and room and board will top $12, 000 next year.

Even most state universities are becoming more expensive, although they are much less than private colleges. The University of Massachusetts tuition and room and board will run more than $3,300 next year. Tuition is up $176. At the University of Oregon, the tuition and room and board bill will run upwards of $3 ,600.

Some parents, even after having saved $10,000 to $20,000 for their child's college education, still find they have to go deeply into debt. Questioning the investment

''[Going to college] isn't an automatic thing anymore,'' says William McNamara, director of the National Association of Independent Colleges and Universities. ''People are questioning whether it's worth the investment. People that go to college now are serious about their goals, and don't just go because their friends go.''

But there are ways to do it, once a student decides it's important enough. For those who are going it alone, it's a Herculean task. Some work part-time and even full-time to help make payments. Some students are taking off a year before college - not to rethink their goals or bicycle across the country, but to earn enough money to start school. Others take time off between terms to earn enough money to continue.

In Boston, subway cars have posters advertising The Student Exchange, which matches students with families who want an au pair - live-in ''mother's helper'' - in exchange for room and board. And a few insurance companies across the country are doing a brisk business in insured tuition payment plans. It's a way of buying college tuition and insurance coverage in one fixed monthly payment. Insured tuition payment plans

The parents or student make monthly payments; the plan pays the college and insures completion of the payments in case a parent dies or becomes disabled. For example, at Richard Knight's Insurance Company in Boston, a plan to cover $6 ,000 a year tuition would require 43 monthly payments of $570, and one of $482. Some universities, including Harvard, offer less expensive versions of the same plan, which they swing by borrowing the money from the school's fat endowment fund.

The education community is giving its all to lobby against the federal aid cuts, and most sources agree that if any cuts get through Congress, they'll likely be much less drastic than President Reagan has proposed. Student financial aid is important to millions of middle-income Americans, and the Congress is feeling the heat from students and parents back home.

Aside from these methods of attacking the problem, the Monitor has looked at two alternatives to being swamped in debt for years, and a third idea that is indicative of fresh thinking on how students can pay for an education. The military option

''To the right, march! One, two, three, four.''

Will this be the new math more college-bound students will be learning before they enter school? If the National Guard, the Army, the Air Force, and the Navy have the money when nobody else does, it just may well be. All three military services have their own programs of helping pay off student loans in order to entice young men and women to enlist either before or during school.

ROTC (Reserve Officers Training Corps) and other military programs would certainly not have to go looking for students if Reagan's proposed budget cuts go through. Most ROTC programs already are full, and competitive standards to enter are high. The cash-flush Defense Department is funneling the money into old and new student assistance programs even as civilian programs languish.

One little-known way to pay for college is through the National Guard. In many states, enlisting in the National Guard entitles an individual to free tuition at a state college or university - anywhere from half to all of the cost depending on the state. In Massachusetts, all tuition expenses through the doctorate level will be paid.

The National Guard will also pay off 15 percent of the outstanding balance of a student loan or $500 (whichever is larger), plus interest, for each year a student serves in the guard. Enlistments are for three or six years, and require one weekend a month and two weeks every summer. In effect, for a six-year enlistment, 90 percent of an outstanding loan would be repaid by the guard.

The loan repayment plan is in addition to National Guard programs of paying bonuses of up to $1,500 and providing school aid of up to $1,000 a year to students who enlist.

The new Army College Fund will combine a soldier's savings with government matching funds and Army incentive supplements.

According to Jack Muhlenbeck, public information officer for the US Army Recruiting Command, an individual must agree to enlist for a minimum of two years (a similar Navy program calls for a three- or four-year commitment) and agree to pursue training in one of over 50 specialized skills areas the Army needs.

The Army will chip in $2 for every $1 - from $25 to $100 a month - a soldier deposits of his or her pay in the special fund. The Army will contribute an additional $8,000 at the end of a two-year enlistment and $12,000 for an enlistment of three or more years. Cooperative education

Co-op education, or work-study programs, have been around for years.

''Co-op was not devised as a way to help students pay their way through school, but it ends up doing just that,'' says Richard Wilson, research assistant at the division of cooperative education at Northeastern University in Boston.

The two schools that have pioneered co-op education are radically different from each other: Northeastern, a grittily urban, working-class college in Boston's Back Bay that runs heavily to engineering, and Antioch College in tiny, rural Yellow Springs, Ohio, which offers basic liberal arts. Both schools have required co-op education for years.

Northeastern helped develop some 1,000 co-op programs in schools across the country, but some of the others ironically may not survive because of cuts in federal aid. Northeastern's program is not subsidized by the federal government.

''We're less reliant on federal aid because our students can earn a great deal of money to pay college costs when they work,'' says Mr. Wilson. At Northeastern, it takes five years to get a bachelors degree, and a student has spent two full years working by the time he gets that diploma. Starting in the middle of sophomore year, nearly all students ''go out on co-op.''

Dean of student financial service Charles Devlin says the earnings of co-op students ''help spread the federal aid around.''

According to Northeastern's dean of co-op education, Paul Pratt, co-op students last year earned $54 million, with the average student earning $207 a week for half the year.

Not only do the salaries make it easier to pay for school, Mr. Pratt adds, but as the job market tightens, the job experience from co-op becomes more attractive for potential employers looking at student resumes. Tuition advance fund

The tuition advance fund (TAF) is the idea of Boston University's controversial president John Silber. The TAF plan he's promoting is an updated version of one rejected by the US Congress in the late 1970s, when money was easier to come by.

It would work by giving the student in advance the amount of money needed for tuition, room, and board - up to $7,000 a year. The student would then repay the advance plus a surcharge of 50 percent through payroll deductions after he or she is graduated. The student wouldn't have to start paying the loan back until his income was at least $10,000 a year. Then the Internal Revenue Service would start collecting a small percentage of the amount loaned, and the percentage amount would increase as income climbs.

President Silber says the plan hews to the old principle that the person who receives a benefit should pay for it. TAF, he says, ''gently but firmly (transfers) the burden of financing higher education from the backs of the parents to the shoulders of the student.''

He claimed in a speech to BU trustees that the plan would not be ''an onerous burden'' on the student, and it would start paying for itself in about 15 years. Until then, Congress would foot the bill.

William McNamara of the National Association of Independent Colleges and Universities says the Silber plan was discussed at the association's annual meeting in February. While he admits there is ''gathering interest'' in the plan , he also says that ''as long as the federal (student aid) programs work effectively, it doesn't stand much of a chance.''

Charles Devlin, dean of student financial services at Northeastern University in Boston, says that the Silber plan needs to be considered much more seriously.

But the plan still arouses heated opposition from most academic administrators who want desperately to maintain the status quo.

''The present system is working well - there's no reason to change it to Silber's plan,'' says John Mallan, vice-president of government relations for the American Association of State Colleges and Universities.

''It's unwise to go to a system of putting such an enormous debt burden on students when they're just starting out,'' says Mr. Mallan. He points out that a 22-year-old couple who married fresh out of college could owe $70,000.

Mr. Mallan claims that Mr. Silber ''has stood almost alone in supporting the plan.'' He also says that ''independent colleges especially (are) afraid that someone would listen to him.'' The reason for the fear, Mr. Mallan claims, is because the TAF plan would make it even less likely that a student would choose a more expensive independent college.

But the TAF plan has several distinct advantages:

* The loan would be available to all, regardless of income.

* Repayment is assured through payroll deduction.

* Within 15 years, the burden of student aid is shifted from the government to the student. The program pays for itself after that.