Saturday, May 31, 2008

Stay Local to Save College Costs

With economic pressure growing, college students might opt to save some money and stay out of debt by staying closer to home and attending a local community college or state university. While gas is expensive, the short commute is almost certainly less expensive than paying for room and board when compared to living with the parents for a few more years.

Most local public colleges are subsidized with state or local taxes, so the price of tuition is almost certain to be lower than any comparably sized private school. Classes may be a little bit more crowded and the professors are probably less known, but that doesn't necessarily mean that the quality of education and opportunity isn't a good deal. Much of what you'll get out of college is directly related to the time and effort you put in - whether or not you read thoroughly, seek out additional sources of information, and/or participate in the organizational experiences the school offers.

Finding money for college through scholarships can be a lot easier at the local level, too. This is especially true if you've been active in the community and established a record of service and participation in events and projects and clubs. These groups love to recognize and assist their members who continue to grow professionally and support the causes that bring the individuals together - and a college education is one of the best ways to support a person's professional development. City and state funds might also offer public scholarships for residents, for example Florida's Bright Futures Scholarship pays for 75% or 100% of the tuition bill of Florida students who meet eligibility requirements (Bright Futures Scholarship).

If there's a specific school for a certain major or education niche that you're set on and completely dedicated to, then it might just be worth the extra cost. If you're looking for a general introduction to higher studies, then there's no reason to mortgage your future income through student loans so you can spend time in college classes trying to decide what you actually want to do.

Student Loans in Short Supply

Economic problems and financial sector problems aren't only affecting the job market. Students looking for college loans might be in for a surprise next year as many companies and lenders leave the business altogether. After Congress reduced subsidies and the subsequent profitability of the federal lending program, a wave of credit defaults threatened to freeze all liquidity and usher in a new era of corporate and municipal bond failures.

While the deflationary doomsday scenario has been averted by creative (and expensive) Federal Reserve actions, many banks and student lending companies are hesitant to get into a risky loan business at low interest rates and few safeguards against the every increasing risk that many of these graduates won't necessarily find jobs that can afford to pay back their student loans.

The typical response of an investor (lender) under these economic circumstances is to raise interest rates for risky borrowers - and this means getting out of the federal program and getting into more private loan offerings. The downside is this becomes a lot more expensive for the student, and family credit history may end up influencing costs and eligibility.

If student loans become scarce, colleges may face declining enrollment. The chain would then reduce budgets, and force the institutions into cost-cutting measures. Perhaps if rationing needs to take place, it might make sense for it to be aimed at the most academically focused college students rather than the most financially secure. The best way to achieve this is to let the student loan industry operate in a free market without federal supports, and allow private and public merit-based and need-based scholarships provide an outlet for students needing financial assistance.

Like housing, perhaps its time for tuition prices to come down a bit. We like to think that spending more means better results, but sometimes the economic cycle calls for a contraction and a re-evaluation of priorities. Is our priority to make college so expensive that most graduates have student loan debt for 20+ years? I don't think so.

Friday, May 30, 2008

College Graduates Face Tough Job Market

Its that time of year for another class of college graduates to celebrate the success of a completed diploma.

Unfortunately for many graduates, the transition from school to the working world might not be as pleasant as it has been for Americans in the past. Nominal wages are flat across the entire economy, and versus inflation that really indicates that wages are down relative to the cost of living. Entry-level wages are down in nominal terms, which means they're significantly down in real terms. Graduates in investment and financial sectors might not find many job openings after the recent string of layoffs, mergers, and cost-cutting in the banking sector. Real estate continues to slow down as well...But demand remains strong in medicine, education, and the sciences.

There's a risk of increased defaults on student loans, as the loans were issues when students were expected to enter an ever-increasing labor/wage market. Students without much debt can adjust consumption, costs, and expectations, but if they're loaded with loans already they may not have any way out of the cycle at this point. Unfortunately, this is just going to create an additional drag on financial sectors and lending companies!

Enjoy the graduation, the ceremonies, the parties. Don't get upset if you're not rich as soon as you graduated, its definitely not your fault that the economy is slowing down and under the weight of heavy public debt. Imagine, things would probably only be worse trying to secure a job without that degree.

Make use of all resources available, from online job searches to campus placement programs. It might not be too late to take on an internship if you can live at home for a few extra months. Jobs at the upper level of institutions will be opening up in the coming decade as more baby-boomers retire from the work-force.