State of U.S. Economy Boosts Enrollment

When the economy experiences a serious downturn, most companies experience changes in the way their business operates. This also holds true for the nations colleges, universities, community colleges and trade schools Many people are opting out of the workplace to go back to school while many high school students are choosing to enroll in their local community college rather than enter the workforce immediately, hoping that better training and an improving economy will help their prospects down the road.

From Indiana to Arizona, enrollment is up, especially at 2-year institutions. This does not come as a surprise to many analysts, who notice this dynamic often occurs when unemployment numbers are on the rise. A few examples of this include Frederick Community College in Maryland, which is expected to have an 8% - 10% rise in enrollment this year. Ivy Technical College in Indiana is seeing an enrollment increase 10.3% in the 2007-2008 academic year. Analysts expect these trends to continue in the near term.

Many wonder how the states are going to be able to cover the financial burdens. Governor Kaine of Virginia warned that the state budget would be slashed this October in areas that are traditionally considered off limits, according to Zinie Sampson of the Associated Press. Thirty or more states have fiscal deficits. Moreover, 60 percent of the funding for community colleges comes from the state legislature. While this may not be an immediate issue, Norma Kent of the American Association of Community Colleges warns that “it’s a perfect storm” that is looming over the coming months.

In addition to community colleges, online courses are also filling up quickly. The popularity of these online courses is causing schools such as Drexel University and the University of Houston to consider expanding their offerings. Drexel has reported an 86% increase in applications for its online courses from January through June, according to an article published by Reuters earlier this month. Education experts speculate that this trend is because of the higher transportation costs as well as other economic factors.

While these increasing enrollment numbers for lower cost schools are significant, statistics indicate that it is not at the expense of private schools, which typically have much higher costs. At all levels of the higher education spectrum, enrollment is increasing as students try to make the most of tough times, while preparing themselves for right opportunity when conditions improve.

Young and in Credit Card Debt

After graduating high school, some students go with their parents to the bank to take out a loan for college. Some go to the bank by themselves, and better yet, some don’t need to worry about paying for tuition. But what happens when an 18 or 19-year-old walks into their bursar’s office and are given a plastic card with a Visa or MasterCard logo on it?

Many colleges do just this, refunding any overpayments on a stored value debit card rather than refunding cash directly to students. While these cards are not technically credit cards, and are certainly convenient, they also encourage the use of plastic by students while familiarizing them with major branded credit card logos. The convenience argument promoted by the companies that provide these cards is flimsy at best, as nothing is more widely accepted than cash. For large amounts, most students have a bank account that already has a debit card.

Schools have defended the practice of forming select, sometimes exclusive, relationships with various companies by touting convenience. Many Schools have also allowed these relationships to permeate wide areas of campus so that credit card issuers may directly solicit student credit applications through various promotions. Whether students make the distinction between the debit cards they get from the school and the credit cards they are applying for while enjoying a credit card promotion is questionable at best. However, with the blanket issuance of credit cards, and on campus credit card application drives, the school has a responsibility of educating their students on fiscal responsibility.
As Tony Pugh of the Chicago Tribune points out in Big Debt on Campus: Credit Offers Flood the Quad, some students are using credit cards to pay for educational expenses, even their tuition. Students may not know what consequences may be down the road. Sure, swiping a credit card is an easy and immediate solution when there is no cash on hand, but with interest rates as high as 28%, students may face a rude awakening when trying to repay their debts.

A survey by U.S. Public Interest Research Groups reports that upon graduating, students without student loans have $2,600 in credit card debt, while those with student loans have $3,000 in debt. Pugh found two students who were willing to discuss the combination of credit cards and attending college.

John Velasco, who was a student at West Virginia University, was lured to sign up for a credit card with the promise of a slice of pizza. He refused. Others may not have had the same good judgment. Another student, Andrew Kunka who attended Loyola Marymount University in Los Angeles, charged $4000 for tuition and regrets it. He stated that he “…feel[s] like credit card companies target us because we really have no financial awareness. We're barely out of our homes, barely having experiences as adults, and they throw these things at us and they don't make you aware of what you're signing into.”

A lot of students may not object to their university giving them a debit card with a logo or using their own credit card to pay for expenses when in a financial bind. One thing is certain - students should know their options, and think twice before filling out a credit card application for a slice of pizza.

Learn How to Control Your Finances and Save

For many young adults, going away to school is the first time that they will have to think about how they spend all of their money. Many college students have never even balanced their checkbooks, but knowing how much you spend is the first step towards saving more money.

An online company called wesabe started in December 2005 to help individuals take charge of their financial situations. A student can easily sign up for an account, link their bank accounts, and can enter how much they spend on groceries, rent, transportation, and entertainment. Students can set goals for how much they want to spend each month and can rely on forums and other community members to give tips on how to save more money. The three minute video tour listed on the website is a great place to start learning more information.

If one decides to choose a different avenue, documenting what you earn and what you spend. Students can track their information – keeping it private on their own computers. Simple spreadsheets can be found by doing a Google search – like one found on vertex42.com.

A new website that may be convenient for students is Revolution moneyexchange. Similar to PayPal, this site allows for easy electronic transferring of money between friends, families, even customers and businesses. Users on the site can transfer money to any other users to cover debts, pay bills or informally lend money. Once money is transferred into the Revolution moneyexchange account, it may then be transferred again directly to the users linked bank account. Unlike PayPal, this site also has a debit card feature, but it is unclear how widely the card is accepted at this time. As with any website, make sure you read all the terms and conditions and get a comfort level before deciding to give any personal information.

Why not learn to save and take advantage of tools that technology provides?

Many Student Lenders are Out, But…

Doug Lederman of Inside Higher Ed wrote an article yesterday entitled Credit Crunch or Echo Chamber? questioning whether or not there will be any difficulty for students paying for college this fall. Time and time again, he points out, we have heard that there is a major problem and we had better brace ourselves for the inevitable calamity. But does a crisis actually exist?

Dozens and dozens of student lenders have stopped issuing federal and/or private loans. The media has been constantly reporting on the latest companies who leave the industry. Some college financial aid officers and directors have voiced their apprehension based on experiences with their own students. Lederman (and many supposed Financial Aid Directors and other school administrators who commented on the article) asserts that just because the signs are there, doesn’t mean the “credit crunch” is the norm for the majority of students and their parents.

There are, however, many students who have been struggling – calling company after company trying to get financing for their education. Robert Massa of Dickinson College claims the “sensational media” may be trying to invent a story. As he points out, “there is no story in ‘same old, same old.’” However, stories identifying the credit crisis as real state there may be a bleak outlook for students who are now applying for student loans. Students that are more vulnerable, such as those whose schools do not participate in FFELP, attend for-profit universities and others, may not get all of the money they need.

The truth is that no one knows whether the crisis is real or not until after students apply for their loans. Despite all of articles reporting on the “credit crisis,” if students get rejected, the question might then be, “Why wasn’t I told that I wouldn’t be able to get my loan?”

Wachovia Drops Private Student Loan Program

Wachovia is the latest student lender that has announced it will no longer be issuing private student loans. This comes a few weeks after the company reported that had lost $8.9 billion dollars in the second quarter. Previously, Wachovia’s subsidiary, Wachovia Education Finance, had been the sixth largest student lender in the United States. The company currently has $9.9 billion in federal and private student loans on the books. Banks have been forced by the difficult credit environment to dramatically tighten lending standards in the face of mounting losses from bad loans.

CNN Money reports that a spokeswoman for Wachovia, Ferris Morrison, did not get into why the company decided to halt their program, stating "At this time, we felt it was prudent."

Congress Passes Overdue Higher Education Bill

The House and Senate reauthorized the Higher Education Act today for the first time since 1998. HR+ 4137, "The Higher Education Reauthorization and College and College Opportunity Act of 2008," passed the House yesterday in a vote of 380 in favor and 49 against. It passed the Senate by a vote of 83 in favor and 8 against. President Bush is expected to sign the bill into law.

The bipartisan bill addressed almost all facets of the federal government’s involvement in higher education. The bill tackled such issues as the simplification of the FAFSA and mandates the Department of Education to generate reports on the most expensive colleges. The colleges that have the largest annual cost increases are required to issue a report to the Department demonstrating why such hikes are necessary and how the institution expects to lower the costs for students.

While a total funding amount was not included in the bill, the overhaul expected to directly cost the federal government hundreds of millions of dollars. And that’s not including the funds that the state governments will need to commit to. To the dismay of many states, they can be penalized if they reduce educational funding. States will now be forced to increase their spending on education in line with the increases voted on in the past five years.

Summed up by Charles Dervarics from DiverseEducation.com, other aspects of the HEA bill would:

• Require colleges and student loan companies to adopt strict codes of conduct;
• Streamline the Free Application for Federal Student Aid, including a two-page FAFSA-EZ for low-income families;
• Give students advance information on textbook pricing to help them plan expenses; and
• Provide support for graduate programs at Hispanic-serving institutions.

There is more good news for students. The HEA bill sets increase the availability of the federal Pell Grants from $4,800 to $6000 in 2009 and up to $8000 by 2014 and federal loans for students who attend minority-serving institutions. Qualified students can receive Pell Grants yearly, as opposed to just for the current term.

While the immediate affects of the bill may not be felt immediately, hopefully students will have less of a financial burden when they try to apply for their loans in 2009.

H.R. 4137 Passed by Congress