Can you afford college?

Nicole Colson explains why, for a growing number of people in the U.S., the grim answer to that question is: "Not anymore."

Is college out of reach?

THE CONVENTIONAL wisdom is that getting a college education is part of the "American Dream"--and a prerequisite to a good job and successful career.

But as the recession deepens, more and more students are finding it difficult or even impossible to pay for school--and higher education is becoming more a preserve of the haves in U.S. society than it has been in several generations.

Some are forced to scramble for alternative sources of income--in the form of extra jobs, scholarships or loans. Others, finding themselves caught in the "credit crunch" and suddenly deemed by banks to be an unacceptable risk, are being cut off from student loans. And parents who might have been able to rely on the value built up in their homes to help pay for their children's college costs are finding themselves without options.

Meanwhile, as states balance budgets by cutting higher education funding, and colleges and universities see their endowments shrink, a growing number of schools are depending on higher tuition and fees to make up for budget shortfalls.

Thus, a UCLA survey of 240,000 incoming four-year college students compiled between April and October of last year found that even before the worst of the recession, students were feeling financially strapped. Just under half of those surveyed planned to get a job to meet expenses during college--the highest figure in the 32 years that the survey has asked the question.

What else to read

For general information about the impact of the financial crisis on students and higher education, read Nan Mooney's "Going to college and grad school looks like a disaster" and "College loan slavery: Student debt is getting out of hand."

The National Center for Public Policy and Higher Education Web site has information about affordability and access to higher education. The Center's report "Measuring Up 2008: The National Report Card on Higher Education" gives a state-by-state breakdown on the availability and affordability of higher education.

For more information about how the student loan system victimizes students, and what you can do about it, visit Student Loan Justice.

In addition, the percentage of students attending their first-choice college dropped to a 34-year low of 61 percent. More than 17 percent of students were accepted by their first-choice school, but chose somewhere else instead.

The proportion of students who said that what they were offered in financial aid played a "very important" or "essential" role in their college choice increased to 43 percent--also the highest recorded figure for that question. The survey also survey found that 8 percent of students attending four-year institutions were expecting to work full-time--again, the highest figure in the study's history.

Meanwhile, tuition and fees are skyrocketing at schools that receive public funding. In California, for example, Gov. Arnold Schwarzenegger's proposed budget would raise university fees around 10 percent. Florida Gov. Charlie Christ is trying to give several state schools more power to raise prices. And universities in both states plan to cut enrollment slots.

Meanwhile, "other states could not wait until fall and have passed unusual midyear increases, including a staggering 14-percent increase in New York," the Associated Press reported.

For students at New York's public colleges, this translates into a $600 tuition increase, at the same time that funding for the State University of New York (SUNY) and City University of New York (CUNY) is being cut by $348 million.

In addition, New York Gov. David Paterson has proposed cutting $47 million from the state's need-based grant program, the Tuition Assistance Program, and making requirements for assistance stricter. Under the proposal, students would be required to take more course credits--15 instead of nine--to receive full assistance.

This comes on top of the fact that state aid to SUNY's four-year colleges and graduate schools had already fallen by 5 percent per student since the early 1990s--and CUNY funding was down by 14 percent.

Nationwide, applications for federal student aid for the current academic year are running 10 percent above last year's record-setting number, according to the Department of Education.

"The financing system for college is in real crisis," Barmak Nassirian, associate executive director of the American Association of College Registrars and Admissions Officers, told the Associated Press. "Every one of the participants in the system is experiencing hardship--higher education institutions, states, aid donors and families all are cash-strapped."

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THINGS WERE bad enough before the crisis hit.

College costs have risen more than 400 percent since the 1980s. In 2008, the average student graduated with more than $20,000 in loan debt. Additionally, the amount of unregulated private student loans that families have taken on has more than tripled in the past five years, and nearly one in 10 college students has loans with interest rates that are as high as 20 percent.

As author Nan Mooney notes:

According to a recent College Board report, about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans. Graduates are expected to begin repaying within six months, healthy job market or no. Loans can be deferred, but never erased (unless you die or are permanently disabled). And when those payments do come due, many will face the prospect of paying back not only fixed-rate federal loans, but also high-interest private loans.

The private loan industry is now responsible for 24 percent of student lending. Before the economic crisis hit, it was the fastest-growing sector of the student loan industry. And though the $700 billion bailout bill includes provisions to enable the U.S. Treasury to buy troubled assets, including private loans, from student loan providers, it provides no relief for the students who have taken out such high-interest loans.

According to a National Center for Public Policy and Higher Education report released in December, the cost of attending college has risen nearly three times faster than the cost of living--and could eventually put higher education out of reach for most Americans.

"College tuition continues to outpace family income and the price of other necessities, such as medical care, food and housing," the center said. Adjusted for inflation, college tuition and fees rose 439 percent from 1982 to 2007--a bigger increase than in medical care, housing and food expenses, according to the report. Median family income rose just 147 percent during the same period, the report said.

"The nation's colleges and universities have become less affordable for students and their families since the early 1990s," said the report. "This year continues the trend in deteriorating college affordability in the majority of states."

For poor and working-class students, the situation is especially bleak. According to the report, "On average, students from working and poor families must pay 40 percent of family income to enroll in public four-year colleges. Students from middle-income families and upper-income families must pay 25 percent and 13 percent of family income, respectively."

In addition, students who enroll in college are taking on more and more debt in order to stay there. "Over the last decade, borrowing has more than doubled," the report said.

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THAT IS, of course, when students can borrow at all. Not only are more and more students finding themselves mired in debt after graduation as they face a bleak job market, but one side effect of the financial crisis has been that many banks have suddenly stopped or severely curtailed lending to students.

According to Finaid.org, a Web site that tracks the student loan industry, some 60 private lenders provided $19 billion to students in 2008. In the wake of the economic crisis, however, 39 of those have now stopped lending to students--and the remaining lenders have made it harder to borrow. According to Mooney:

Though money is still available--only 25 of the top 100 lenders, although responsible for 91.5 percent of loans, have dropped out--increasingly, there are conditions attached.

Lenders are pulling back from the community college and trade school markets--where there are higher default rates, lower graduation rates and lower job placement--at the same time that community colleges are seeing an increasing number of applicants seeking an affordable education option.

Community colleges and other two-year institutions are traditionally an option for working-class students and "non-traditional" students (often older students, already working full- or part-time, returning to school in an attempt to start a new career) who often are unable to afford tuition at a four-year college.

And while community colleges spend less per student compared to other types of colleges, they have cut spending the most sharply as government aid has declined.

"Students are paying more, and a greater share of the costs, but are arguably getting less," Jane Wellman, executive director of the Delta Project on Postsecondary Education Costs, Productivity and Accountability, told the New York Times.

For students like Elizabeth Lalasz, who attends Chicago's Truman College, suddenly being cut off from loans can throw an entire academic career in jeopardy.

Lalasz, a first-year student in the associate's degree nursing program, knew that money would be an issue when she was accepted in May, and she began filling out her financial aid paperwork.

Since Stafford loans--the federal loans that are generally an alternative for those who can't qualify for Pell grants (need-based grants for very low-income students)--weren't available through Truman College, Lalasz was forced to look to a private lender. But when Lalasz went to her bank, JPMorgan Chase, she was informed that it no longer handles loans for students at Truman. As she said in an interview:

They tried to look it up, and basically said, "Your college isn't on the list." I said, "What does that mean exactly?" He said, "Well, Truman College isn't on the list this year. It may be on the list next year. But right now, we just don't offer loans to your college."

I said, "So what should I do?" He said, "You can try to apply [for a loan] next year." I said, "But I'm going to school this year, and I really need this money. What should I do?"

As it turns out, Chase isn't alone in restricting lending to students at two-year colleges. The New York Times reported in June that:

[s]ome of the nation's biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation's top universities.

Citibank has been among the most aggressive in paring the list of colleges it serves. JPMorgan Chase, PNC and SunTrust say they have not dropped whole categories, but are cutting colleges as well. Some less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, Calif., say they have been summarily dropped by some lenders.

The practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation's neediest students will be hurt the most. The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years.

Students are left scrambling to find alternatives when their expected funding fails to materialize. In California, for example, tens of thousands of students were forced to look for other lenders when Citigroup suddenly stopped making loans to students at all the community colleges in the state.

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IN LALASZ'S case, her bank recommended that she look for a student loan from Wachovia--which was then about to go bust. Then, Chase offered to come through on a personal loan--but, as Lalasz noted, it would require immediate repayment at a higher interest rate, as opposed to student loans, under which repayment is deferred until school is finished.

"I said, 'But the whole point is I don't want to work full time and go to school, so how am I supposed to pay you back?'" she said. "He just sort of stared at me and then offered the Wachovia option again, and then subsequently went on to say that he would offer me a deal on my credit card."

Such "choices" are becoming the norm. As Jacqueline K. Bradley, assistant dean for financial aid at Mendocino College in California, told the New York Times, "If we put too many hurdles in [students'] way to get a loan, they'll take a third job or use a credit card. That almost guarantees that they won't be as successful in their college career."

As Lalasz put it:

There's no safety net for anybody at the school, and no options in that sense...Most people work full-time and go to school at night, and that's just a typical thing that most students here are going through, because there's no other means by which they can support themselves...A majority of people that I'm in class with have a full-time job and go to school--or they have a severance package from being laid off that they're living off of right now.

Because of the intensity of the nursing program in the second year, Lalasz doesn't think working while going to school is an option. For now, it seems, the only alternatives left are finding someone to cosign a loan or a family member to borrow from.

In Lalasz's case, no family member wanted to cosign a loan because, "The loans on offer that potentially we could get are Sallie Mae loans, which is a frightening prospect--and your credit has to be incredible, even to get a loan with a cosigner," she said.

Instead, Lalasz said that she hopes to receive a personal loan from a family member.

As she summarized:

A lot of people are looking to going back to school, and two-year community colleges are very desirable in that sense, because they seem affordable. But if you don't have a job, how are you going to go back? And if they don't offer anybody financial aid, how are you possibly going to afford it?

If college is supposed to be a stepping-stone to the American Dream, what many of today's college students face is more of a nightmare.