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Painful Choices as College Bills Wallop Families
By PHILIP SHISHKIN
(See Correction & Amplification below.)
The day after Thanksgiving, Glen O'Brien had bad news for his two children, who were visiting from college. With his electronics business pummeled by weak demand, he told them he couldn't afford to keep paying their bills at New York University.
"We were both completely in shock," recalls his daughter Caitlin, a junior majoring in Spanish. She was looking forward to spending her spring semester abroad in Chile. Instead, she is planning to move back to California, get a job and take cheaper courses at a state college. She hopes to return to NYU next fall. The school costs about $50,000 a year for tuition, room and board, and fees.
![[college bills]](http://s.wsj.net/public/resources/images/PJ-AN818_pjPINC_DV_20081210165045.jpg)
Jason SchneiderAs the economy shrinks, joblessness expands and small-business owners lose income, many students and their parents are struggling to make payments for the second half of the academic year, which are typically due this month or in January. Midyear applications for financial aid, typically rare, are up at a number of colleges, as families who believed they wouldn't need help earlier in the year are now feeling squeezed. Michigan State University, where students have been hit hard by the woes of the auto industry, last month set up a $500,000 fund for families hurt by the economy's slide.
Experts say it's too early to tell what effect the recession may have on overall college enrollment, which typically rises in downturns as the unemployed who can afford it flock to schools for retraining. Yet next fall is shaping up to be a nerve-racking time for many colleges, who are also coping with shrinking state subsidies and endowments.
Many students are already making painful adjustments, including dropping out, borrowing more to stay in school, transferring to cheaper schools or taking on part-time jobs. A third of parents expect the economic downturn to affect their ability to pay for college this year, according to a survey of 7,000 parents of newly enrolled freshmen by Eduventures, a Boston-based research firm.
"I'm packing to move out of my apartment as we speak," says Jose Kerch, who was laid off four months ago from a call-center job in a bank and is now attending Glendale Community College in California.
Mr. Kerch, 37 years old, says he has already received some financial aid. He applied for more after burning through most of the money in his 401(k) retirement plan and having his 2004 Ford Ranger repossessed. Pat Hurley, Glendale's financial-aid director, says Mr. Kerch's application is being assessed in what she calls a "crunch semester" for her office. Glendale says financial-aid applications are already up 15% from the last academic year.
At Colorado College, which costs about $47,000 a year and has 2,000 students, financial-aid director Jim Swanson says he's dealing with at least five cases of laid-off parents. "For our institution, that is significant," he says. The Colorado Springs school has established an emergency fund for hardship cases and is also helping struggling parents set up payment plans. In at least one case, he says, a student is taking a leave of absence because her father's small business is hurting.
Angela Cobián, a sophomore majoring in political science at the school, is planning to apply for more scholarships and student loans when she goes home for the Christmas break. Her father works for a contractor laying cable and operating heavy machinery -- a business that's been hit as construction has slowed. Ms. Cobián says she was expecting to graduate with about $30,000 in student-loan debt, but now "it's gonna be higher." She plans to cut her Christmas break short to take a paid internship at a law firm.
Debbie O'Donahue, who says she is carrying more than $100,000 in college debt for her three sons, is borrowing again to put her fourth son through Lock Haven University, a state school in Pennsylvania. "I don't have a choice," she says. "If I don't do it, he's going to leave college." The family's financial predicament became even more dire this year, after her husband, a parts manager at a General Motors dealership, saw his income shrink, Ms. O'Donahue says.
A Mountain of Debt
Jane Sawyer, a real-estate agent in San Juan Islands off the coast of Washington, is struggling to keep her son, Michael Guard, enrolled at the University of Chicago, where he's now a sophomore. "I'm trying really hard so he doesn't graduate with a mountain of debt," she says.
As house sales fell this year, Ms. Sawyer says, her income tumbled to a third of what she'd made in previous years, while her expenses rose. Her husband, Michael's stepfather, recently had a stem-cell transplant for lymphoma. All of that has left Michael, 19, scrambling for money to stay at Chicago for the quarter that begins after Christmas. He already has some grants and student loans, covering about $20,000 of Chicago's $50,000-a-year bill. But he's been relying on his mother and savings from summer jobs to cover the remainder.
Michael, who studies philosophy and Spanish, is now considering asking his step-grandfather for a loan. He says he may skip the winter quarter and transfer to a cheaper school next year. "I hate the idea of having to borrow money," he says. Susan Art, dean of undergraduate students at the University of Chicago, says the school hasn't yet seen a huge impact from the recession.
Juggling Jobs and Classes
For working students, the recession is making it harder to juggle jobs and classes. Nicholas Lima, a sophomore at Rhode Island College in Providence, already has student loans and three part-time jobs on campus. Budget problems have prompted the state to impose a midyear tuition increase that will cost Mr. Lima about $200 per semester, so the 23-year-old Army veteran is looking for another job, possibly bartending on weekends.
Families who were counting on investment funds to pay for school are struggling, too. Jory Card, a student at the University of Oregon, says his great-grandmother left a trust fund, invested mostly in stocks, for his and his brother's education, but it's lost much of its value. His parents are now paying his tuition out of pocket while he looks for jobs and scholarships.
Community colleges, where tuition is a fraction of what private universities charge, say more students are looking to transfer from more-expensive schools. At Brookdale Community College in Lincroft, N.J., where tuition is about $1,700 a semester, "we are getting heavy phone volume from people looking to transfer midyear," says Michael Bennett, director of financial aid. Brookdale has also seen "a dramatic increase" in financial-aid applications for spring, he says.
For Mr. O'Brien, the business owner with two children at NYU, the reversal of fortune has been stark. His San Rafael, Calif., company, Electronic Stockroom, supplies flat-screen television sets, projectors, speakers and other gear to companies installing home movie theaters. The business has enabled Mr. O'Brien, 54, to buy a second home, and to send Caitlin, 21, and his son Conor, 18, to NYU, the school their grandfather attended.
Earlier this year, as Conor was entering NYU to study music recording, a slowdown forced Mr. O'Brien to ask Caitlin to borrow $12,500 for the fall semester. Orders continued to plummet, eventually dropping by 30%, Mr. O'Brien says. He cut 13 of his 38 employees and closed some warehouses, and is now selling one of his two homes.
Moving in With Friends
Caitlin, who's been working as a nanny in New York, says she's planning to move in with friends in Los Angeles and look for a job while taking classes at a state college. She has written to NYU to explain her family's financial situation and to ask the school to ease its restrictions on the amount of outside credits a student can use toward an NYU degree.
The school just offered her a $4,000 scholarship, Caitlin says. But while she appreciates the offer, she plans on taking a leave of absence for the spring semester.
NYU spokesman John Beckman says the financial crisis hasn't had a big impact on the school. "Things look little bit different than last year, but not a lot different," he says.
Conor, meanwhile, is still looking for a way to stay in NYU. He's hunting for jobs, and to save on Manhattan's high housing costs, he's thinking of moving in either with an aunt who lives in New Jersey, or with friends in Brooklyn. His father's business "was doing so well," he says. "I didn't think it could cave in so quickly."
Write to Philip Shishkin at philip.shishkin@wsj.com
Correction & Amplification
Electronic Stockroom, a closely held electronics supplier based in San Rafael, Calif., has reduced the operating costs of its warehouses and closed a sales office. This article incorrectly states the company had closed warehouses.
Printed in The Wall Street Journal, page D1
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