Colleges Scramble to Help Cash-Strapped Students

We guess that even a "cash-strapped" college has more liquidity than a cash-strapped student?

Facing job losses, dwindling college-investment accounts, and a tight credit market, students and parents have been streaming into financial-aid offices, asking for adjustments to their aid packages. Colleges are trying to help, but as the second semester starts up, some students have had no choice but to drop out or scale back the number of classes they're taking.

To expand financial aid, many colleges are cutting back on hiring, and construction projects are going on hold. Some institutions are getting creative on the fundraising front – think special appeals to alumni. Another tactic: Some colleges are offering leniency to students with unpaid balances.

School officials thought the trouble would hit this past fall. Instead, overall enrollments were "perfectly normal," says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (AACRAO) in Washington. But now, he says, "people are apparently running out of steam."

Midyear departures are particularly disruptive. Schools create budgets based on enrollments for the year. And for students, "it's very hard, having done one semester, to then [temporarily stop or transfer] and not end up losing a lot of credits and a lot of time," Mr. Nassirian says.

Nearly a quarter of private colleges and universities and 13 percent of publics expect second-semester retention to be worse than last year's, according to a survey of 214 chief financial officers by The Chronicle of Higher Education and Moody's Investors Service.

Should You be Worried? What Can Your Campus Do?

Robert Shireman, executive director of The Institute for College Access and Success tells us that "there has not been one case of a student or parent who can't get the federal loan they are eligible for." But that doesn't mean there aren't problems to address:

I suggest a different solution to help the dependent students who genuinely need additional loans. College financial aid officials should have access to a substantial, but not unlimited, pot of additional loan funds to allocate to students who face exceptional circumstances as determined by the college. The additional loan funds should be available to colleges that, overall, do a good job of preventing students from having to take out a lot of loans. This approach respects the professional role that financial aid officials play in assessing students’ needs and family situations. It provides them with a tool they can use for those cases, while preventing schools from broadly taking advantage of students and of the federal government.

In the midst of this economic disarray, it would have been reasonable to expect that the student loan system would be in shambles. That is why editors keep assigning reporters to write stories about people who can’t get loans. But the real problem is not a lack of access to student loans. It is much bigger than that. The challenge is to make sure there is an affordable place in college for students from all backgrounds, in the face of growing financial need, increased demand for higher education, and underfunding at the state and federal levels.

NAICU Survey Finds Impact from Student Loan Crunch, but No Widespread Loan Crisis for Fall 2008 Semester

NAICU surveyed its 953 member institutions about the effect of the credit crunch on student loan availability for ths current semester. Good news: Not much of a strong impact, yet. Here's the press release and here's the full report. This quote is from the press release:

While there was no widespread student loan crisis this fall, there were multiple instances of students taking time off of school, switching to part-time status, and turning to alternative forms of financial support, according to the results of a survey conducted by the National Association of Independent Colleges and Universities. The survey, released today, also found a considerable amount of behind-the-scenes scrambling by private colleges to keep loan capital flowing to their students.

"In the main, the survey shows that independent higher education and our students weathered the student loan crunch through September," said NAICU President David L. Warren. "To varying degrees, individual students and institutions were impacted by the crunch, but no widespread access crisis materialized in the first half of the fall semester.

"However, the full-blown effects of the credit crunch and the nation's economic struggles are yet unknown," Warren said. "It is impossible to predict the possible future consequences of the nation's continuing economic struggles on students and colleges."

As Credit Crisis Freezes Colleges, Worries Mount

Many thanks to our friends at The Chronicle of Higher Education for allowing us to share this comprehensive report with SCUPers free of password protection.

When the stock market plunged 778 points this week, losing almost 9 percent of its value in one day, higher education responded in an uncharacteristic way: It began to buckle.

Colleges have often considered themselves recession-proof. But this week’s events compounded an already difficult year for many institutions, which have suffered from declining state support, tightening credit, and losses on endowment earnings. As a result, the financial meltdown—with its promise of a prolonged economic downturn—prompted some institutions to take radical steps and wreaked havoc on the way colleges do business.