This article misstated the time frame of a 7.6 percent decline in the value of 529 college savings plans. The drop came since the second quarter, according to preliminary third-quarter figures.
The Strain To Pay for College
Sunday, October 19, 2008
With a 3.3 grade point average and a 1700 SAT score, Danielle Price has done better than many of her classmates. Getting into college won't be a problem. Paying for it will.
"When I originally started to plan out the schools I wanted to go to, I didn't take into account money," she said. "Until the economy got bad, and then I started to look at what I could handle and what my family could handle."
She has ruled out Johns Hopkins University in Baltimore as well as Emory University in Atlanta. Too expensive. She is still holding out hope for Auburn University, a state school in Alabama, if she can get a scholarship. But she is also now looking inside her home state of Virginia. The University of Virginia and Norfolk State University are good, cheaper options, she said.
From now until the end of the year, she'll be feverishly applying for scholarships. "I'm really hoping I can get some financial aid," the Lorton resident said. "I really don't want to have to put off school for a year to get money. That would be the last resort."
As members of the high school class of 2009 fill out their college applications this fall, many are thinking more about affordability than academics. With household debt on the rise, parents have less money for their children's educations. While families' savings are down, tuitions are up. At the same time, several private lenders, squeezed by the credit crunch, have left the student loan business, taking away what had become a popular alternative to federal financial aid and scholarships. Those that remain have tightened their standards to the point where few students can get loans without co-signers, advisers and college financial aid directors said.
"The problem with parents getting ready to pay for college is three-fold," said Peter Mazareas, vice chairman of the College Savings Foundation, a nonprofit organization in the District. "Their home equities have decreased, the cost of college continues to rise, and to top it all off, there's difficulties getting college loans. So you've got almost a triple perfect storm that makes it very difficult for many families going forward to come up with the savings as well as the loans."
Some of the most vulnerable families are those with state-sponsored 529 college savings plans, which operate like 401(k)s and are thus subject to market volatility. Parents contribute money to a fund, which is divided up into stocks, bonds and other investments. Preliminary figures from Financial Research, a Boston consulting firm, found that the value of 529s had declined 7.6 percent as of the second quarter. Total assets in 529s at the end of the second quarter were $110 billion.
"Families are looking at their overall financial situation, and they're finding that the money they thought would be there for college might not be," said Chris Long, president of MeritAid.com.
A survey of 2,500 prospective college students nationwide by MeritAid.com, which tracks merit scholarships, found that 48 percent were more concerned than ever about being able to afford college. Fifty-seven percent were considering less prestigious schools as a result, while 16 percent said they were putting off college altogether because their families couldn't pay for it. Other students said they were choosing schools close to home to save on fuel and housing costs or going to two-year rather than four-year colleges, the survey found.
Stephanie Thomas, 17, of Baltimore really wants to go to college outside Maryland just like her brother, who is at Pennsylvania State University. Drexel and Clarion universities, both in Pennsylvania, were high on her list. But if she doesn't get enough financial aid and scholarships, she will probably end up at the University of Maryland at College Park. "To stay in Maryland would be devastating to me," she said.
Her parents, a teacher and a pastor, want her to go to the school of her dreams, but they said they could only do so much. "I had the opportunity to go to college, and I want my children to be able to have that same opportunity, but the way things are looking, we're just prayerful that they have that opportunity," said her mother, Natalie Thomas.
Some public university officials said they anticipate a rise in applications this fall as students forgo the hefty price tags of private schools. Sarah J. Bauder, director of financial aid at the University of Maryland at College Park, where annual tuition and fees add up to $8,005 for state residents, said applications were up 4 or 5 percent already. "Any in-state or public in-state institution becomes more attractive financially, and it's definitely going to influence behaviors in terms of where students apply in the future," she said.