Economic Crisis Hurting Students' Ability to Pay For College
BLOOMINGTON, Indiana - Late Thursday evening, Neal Theobald,
Indiana University's vice chancellor for budget administration,
received a sobering letter from Sallie Mae, the nation's leading
provider of student loans.
"Because of the continuing turmoil and uncertainty in the credit
markets, Sallie Mae has made the difficult decision to tighten the
underwriting on all our private student loan products, which will
require applicants to meet higher credit standards. We believe that
this action will mean lower approval rates for these loans," wrote
Sallie Mae Executive Vice President Barry Feierstein.
The lending giant also announced plans to "adjust" or raise its loan pricing.
decisions were not easy to make," Feierstein said in the letter, "but
the current financial markets provide no other choice."
time when student financial aid requests nationwide are up 16 percent
from last year, Sally Mae's decision to make fewer loans at a higher
price will only deepen the financial pain of millions of parents and
students who already are struggling to pay for college educations.
the latest example of how the Wall Street crisis is digging into the
pockets of Americans who are far removed from New York City's financial
Bloomington is another stop in a journey into America
to chronicle these effects on folks of all backgrounds. Journalists
from McClatchy and the American News Project, an independent video news
outlet, have reported on the wealthy in Connecticut, growing legal wars
New York City, family health and financial insecurity in Pennsylvania,
job losses in Ohio and now higher education anxiety in Indiana.
The project, "Fallout on Main Street," is available in print, on video and on the Internet.
Historically, when the economy starts to tank, students return to higher education in greater numbers.
with the credit crunch and money tight and the economy so bad, I think
it's going to be difficult for students and families to pay that
college tuition," said Roger J. Thompson, IU's vice provost for
enrollment management. "I talk to parents fairly regularly and they're
struggling. Their kids are down to the last semester or two, money's
tight and they're worried about their jobs and they're just hoping they
can get their kids the rest of the way through."
was just a toddler when her father died. And she was still in high
school when ovarian cancer took her mother's life.
Now only two
months shy of her master's degree in public health, the 24-year-old
Lafayette, Ind., native owes nearly $70,000 in student loans after
financing almost all of her six-year college education with bank loans.
enormity of her debt first hit Daugherty last year after she received,
for the first time, a bank statement that tallied all of her loans,
which then totaled nearly $60,000. "I kinda freaked out," she recalled.
"I saw it, and my stomach just turned. It almost didn't seem real. $50
or $60,000? I'm like, 'Really? I racked up that much?' ... It's so
overwhelming. It feels like I'll never be able to pay it off. How am I
ever going to be able to buy a house?"
more immediate concern is finding a job in the ultra-tight job market.
Daugherty's already applied for more than 15 positions without success.
She wants to work for a non-profit agency, but she fears that the
troubled economy may be conspiring against her. "I think there's going
to be cutbacks in funding and I feel like people won't be as willing to
hire new people into organizations,' she said. "I'm getting really
scared because I don't know what to do if I can't pay. I mean if I
don't have a job, can I claim financial hardship? I really don't know."
graduation, Daugherty will continue working part-time in the university
communications department and waiting on tables at Mother Bear's
pizzeria, where the entire night shift on Friday seemed to tell similar
tales of financial stress aggravated by the weak economy.
Miller, a freshman who buses tables at the restaurant, said that her
mother, a paramedic, has taken a second job to help pay the tuition for
her four children, who are all in college at the same time.
of us have jobs while we're in college because it helps (our parents)
out tremendously. I might have to take on more shifts to help them
because the economy now is just going down and everyone is feeling the
effects of it." Miller said.
Antane Armstrong, a waitress, left
IU last year because of money problems. She's trying to save enough
money to re-enroll, but with tips and business both declining, her goal
has become harder to reach.
Armstrong typically gets the standard
15- to 17-percent tip with a few who always leave 10 percent. "Now the
10 percenters are tipping 5 percent, and everybody else has gone down
to ten," Armstrong said.
Hostess Laura Cole, a 19-year-old
sophomore, had a trust fund that was supposed to help her with college,
but because it's invested in the stock market, it's been losing value.
under 21, so I can't touch my mutual fund, so I just sit back and watch
it fail," Cole said. Her brother's fund dropped to $20,000 from $40,000
in a matter of months, she said.
Even future college students and their families are taking note of the costs.
Saturday, about 20 Bloomington-area 4H club members met at the local
county fairgrounds to hear about their college financial aid options
from Roy Durnal, a senior associate director for recruitment at Indiana
University. Listening intently were Sylvia Reece of Bloomington and her
18-year-old son, Mykel Faultless.
Reece stopped working several
years ago to care for her ill father and grandmother. She'll use her
personal savings and help from her first husband, Mykel's father, to
finance their son's freshman and sophomore years.
To save money, Mykel will have to attend a local community college for two years before transferring to IU as a junior.
"It's a little bit cheaper, and the credits will transfer," Reece explained.
will also have to contribute. He works at a car wash and local movie
theater to make ends meet. He's also got some money saved from
livestock sales through the 4H club. Last year, he sold a chicken for
$300, and his 310-pound pig fetched $2,000.
But the budding business major will still need some student loans, and Durnal had a sobering warning for all the youngsters.
certainly hate it when I see students that are ready to graduate and
facing what would ultimately be like a house payment just paying off
their student loans. My first lesson for you guys is to be aware and
don't get yourself too overburdened with that loan debt," Durnal said.
still new to all this college stuff and I don't really know what's
going on but, but when he said that, it worried me," said Mykel, a
husky lad with an emotionless face.
To help with the costs, Reece
said she plans to go back to work when her son transfers to IU, and
even though he'll continue to live on their 8-acre farm with the
horses, goats, pigs and chickens, tuition - without room and board -
will still cost about $10,000 a year.
"I really hate to see him
have to get all the loans and everything, but the jobs just aren't
there, so it's scary," Reece said. "It's downright scary."
About this project: This is another in our series of articles on Fallout on Main Street.
The joint project with journalists from McClatchy's Washington bureau
and from the American News Project, an independent video news group,
has gone into America to get the reaction of regular citizens to the
unfolding economic troubles.