Students and their parents get private loans through third-party lenders, such as banks and credit unions that are not affiliated with the university.

So far for the 2003-2004 academic year, Penn State students at all campus locations have accrued a total of almost $41 million in private student loans, said Bob Snyder, director of staff training and administrative services in the Office of Student Aid.

That is in comparison to about $30 million the previous year and about $13 million in 2001-2002, Snyder said.

These figures are only amounts students report to the university, but there are many more students who have private loans that the financial aid office does not know about, Snyder said.

Last academic year, at University Park alone, 2,389 students had over $20 million in private loans, Snyder said.

That is about a 50 percent increase in the number of students from the 2001-2002 year and almost a 43 percent increase in the amount of private loan money.

Snyder said the number of students and the amount of aid have increased so much in recent years because of the increased cost of tuition, room and board, and other university fees.

Undergraduate tuition increased by almost 12 percent last academic year and about 10 percent this year.

"State aid programs have not kept up at the same rate. More and more students and their parents are turning to private loans," Snyder said.

Sandy Baum, professor of economics at Skidmore College, in Saratoga Springs, N.Y., and senior policy analyst at the College Board, said federal loans through the university allow for a six-month grace period after graduation, and have low interest rates.

However, private loans have higher interest rates and require the recipient to begin payments right away, Baum said. The trend of using private loan money to help pay tuition is a national one, not specific to Penn State.

Nationally, the cost of tuition, adjusted after inflation, increased 47 percent at public four-year colleges between 1993 and 2003, Baum said.

About 5 percent of students at public colleges have private loans, said Kenneth Redd, director of research policy and analysis for the National Association of Student Financial Aid Administrators. The U. S. Department of Education conducts a survey of more than 40,000 students every three years to obtain this data, Redd said.

However, the numbers are probably higher because only loans designated by banks as educational loans and approved by the school's financial aid department are part of the data, he said.

"Banks have seen a huge market in students for at least 20 years. They are like credit cards; companies are constantly sending out applications [for loans] to students," Redd said.

During the 2002-2003 academic year, undergraduate and graduate students spent $6.9 billion on private loans, Baum said.

Redd said the most important first step is to talk to someone in the financial aid department to find out loan options.