The Recession And The Effects On Paying For College

The economic events of the past year have led to the dramatic increase of concerns over how one can afford paying for college. Every method of paying for higher education has been negatively affected. All prospective college students must consider their options when it comes to being able to pay for the college that they want to attend.

My younger cousins are close to the stages of college selection and application and their parents are worrying how they could pay for their children to attend the expensive brand-name colleges if they get accepted into those schools. When it comes to school selection, the financial aspect has been magnified.

Calculating how to cover the costs of tuition would need to account for the changes to these financial sources:

1. Scholarship and Grants
   Scholarships and grants can come from any type of institution and come in any amount. Over the past year, these institutions have lost money to bad investments or lack of business. For example, a few universities lost money in the Maddoff scandal. Therefore, we will see a decrease in the availability and the amount of money that will come from scholarships and grants.
2. Federal Aid
   It is very difficult to say whether the government will provide less federal aid even with the billions of dollars in bailout money to banks. Logically, many would assume this would affect all other governmental financial policies but it seems like money is being created out of thin air anyway. Federal aid may be the least affected by the recession.
3. Student Loans
   Probably the most significant source of paying for college is the student loan. The effects of the housing and credit crisis that led to the downfall of many financial institutions have tricked down to everyday borrowers. Although interest may be lower, credit is harder to get. Normally, students can easily obtain a school loan from anyway that is willing to lend them money. Now, there are speculations that those with little to no credit will have trouble when it comes to getting a school loan.
4. Parents
   Ah, the most direct source of money for college students is also the source that took the biggest hit from the recession. Investments made through IRAs, 401k’s, and 529 plans have all fell into the negative area and those who used these financial vehicles to pay for college education will find little in them. Also, loss of jobs must be mentioned because no money for mom and dad means no money for the student.

From the perspective of getting a good education, students shouldn’t let costs hinder them from going to prestigious schools like Harvard or Princeton even if it mean they’ll be paying for it for many years to come. Though it is not as simple just wanting to attend an Ivy League school, other options such as state and city colleges can produce highly competent individuals and these institutions would receive much more attention from potential students.

Photo credit: umjanedoan

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