The class of 2009 will be one of the largest in America’s history. More than 3 million students are getting their high-school diplomas in late spring. Those who plan to go on to university have been told to expect a rough time: with so many students applying, winning admission to their college of choice will be a challenge. But those who clear that hurdle will find that their problems are just beginning.
College life is an enviable set-up given the job market at the moment. It comes at a price though: an average of roughly $25,000 (Rs.12.5 lakh) per year at a private university, and $6,600 (Rs.3.3 lakh) at a state one. That was this year, and next year it will in most cases cost a bit more. This is ominous news for students and the people who fund them. Parents have lost jobs and seen their savings wither. “I think more parents are being emboldened to ask for more money, or to ask for financial aid,” says James Boyle, the president of College Parents of America.
But few universities are in a position to help. In more than 20 states, cash-strapped legislatures are talking about cutting funding or have already done so. Many public universities are therefore raising tuition fees. Private schools without big endowments are in a tight spot: they need tuition money to pay their operating costs.
Top colleges with fat endowments are doing better, but they are still struggling. For years, Yale University’s endowment fund posted double-digit returns. In fiscal 2000, it gained 41 percent. Institutional investors marvelled. The fund’s manager wrote a book about it. In December, Yale’s president announced that the value of the endowment had fallen 25 percent since June. That is not unusual. A new study of 235 universities found that their endowments dropped, on average, by 24 percent in the last six months of 2008.
Students can borrow tuition money, but that has problems of its own. The danger is that they will end up like so many of their older siblings, saddled with loans. Cautionary tales abound. Robert Applebaum, a lawyer in New York, began his legal career as a prosecutor before deciding that, with $75,000 (Rs.37.5 lakh) in law-school loans, he could ill afford to stay in the public sector. He started a Facebook group on a whim earlier this year: ‘Cancel Student Debt to Stimulate the Economy’. Three months later, it has more than 180,000 members.
Decision time looms. College acceptance letters have been arriving during the past month, and in many cases students have to reply by May 1. Another annoyance for the admitted students is that they have little bargaining power. If they threaten to take their money elsewhere, the college will seldom worry, let alone offer discounts or better loans. There is always a waiting list, and an especially big one this year. But at least this year’s crop of young students will find they have plenty of friends in the same boat.
(Excerpted and adapted from The Economist)