The combination of the near economic collapse of our financial system in September 2008 and the worst job market since the Great Depression will soon create the perfect storm for many colleges throughout the nation. College costs have increased an average of 5% per year over the past twenty years. According to recently released reports from the College Board, most students and their families can expect to pay, on average, from $172 to $1,096 more than last year for this year's tuition and fees, depending on the type of college. Private four-year college costs in 2009 averaged $26,273 (up 4.4 percent from last year). Four-year public colleges raised tuition and fees by an average of 6.5 percent last year. Given the financial hardship of the country, it's simply astonishing that colleges and universities would have these kind of increases.
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I want to be among the first to go on record in saying colleges across the nation, both public and private, are in for a rude awakening. Beginning in 2010 and growing incrementally from 2011-2015 there will be a decline in college enrollment never before seen, as many parents will be unable to afford the high costs of college tuition, room and board. Why?
There are a number of factors converging into a cataclysmic "perfect storm" for college-bound students. The first and most significant factor is unemployment. There is no near end in sight for the jobs market. Currently, there are approximately 17% unemployed/underemployed, or 27 million people earning little or no income.
The second factor is home equity. Due to the collapse of the housing market, there is very little home equity around and, for those with home equity, very few banks are willing to lend.
The third factor is the student loan market. Fewer banks are willing to participate in the student loan market. Compounding that is the decline in credit worthiness of many borrowers due to job losses and credit card lines already maxed to their limits. Many students and their parents will be unable to find the money to pay for college expenses.
The last factor is endowments. Many college endowments lost 40% of their value in 2008-2009. They will not be able to recover from these losses in the near term. The loss in endowment money will translate into fewer scholarships as colleges grapple with managing their existing impoverished endowment funds.
What will it all mean? The Ivy league and other top tier schools will see very little, if any, impact to their enrollments. The colleges, however, that will be devastated will be the second tier and little known, private and public college programs who will see enrollments drop precipitously over the next five years. Many will be unable to sustain themselves and will be forced to close their doors. Lower enrollments translate into fewer college graduates. With our country's spending seemingly out of control and a deficit which is expected to double to $24 trillion in just ten years, our nation's future generation will be educationally ill equipped to meet the challenge. The effects of the 2008 economic meltdown, I'm afraid, will be with us for a very long time.
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