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The Odds of Paying for College with Financial Aid

Just as the economy suffers, so does financial aid to college students. Although you cannot compare tuition statistically to inflation rates, (the analytical data does not support the theory), on average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years. For a child born today, this means that college costs will be more than three times current rates when the child matriculates in college. (according to

Financial aid can be the deciding factor in the case of college tuition. The average list price of tuition and fees for the current academic year is $6,585 for in-state students at four-year public universities and $25,143 at private colleges, with some costing far more. Grants and tax breaks lower the average net price to about $2,900 at public universities and $14,900 at private schools, according to the College Board.

There are numerous ways to pay for college. It generally depends on the family emphasis as to the importance of college. Those who do not have a stash, eventually have to face the market, the competition for grants and scholarships and the government availability for loans.

It doesn�t take a Rhodes Scholar to figure out that if the economy credit is suffering, so will the loan situation suffer. In fact, though there are many Rhodes Scholarships in the US and abroad, the original Rhodes scholarship was given from the Rhodes trust from the University of Oxford. The suffering from the lack of financial aid will become evident by the fall of 2009 after new applications for loans and scholarships are filed.

This is not to say that there are �no loans,� but changes are going to be noticed by fall semester of 2009. "The financing system for college is in real crisis," said Barmak Nassirian, associate executive director of the American Association of College Registrars and Admissions Officers. "Every one of the participants in the system is experiencing hardship � higher education institutions, states, aid donors and families all are cash-strapped."

Congress has even increased the loans available. According to the Department of Education, applications for federal aid for 2009 are running as much as 10% above 2008. One of the scariest aspects is that families� savings in Section 529 Plans, which are tied to mutual funds, have plummeted. For many this was the source of funds for higher education for students.

The government increased student borrowing ability in the midst of the credit crunch, ensuring the continued flow of federal loans that families depend on ahead of costlier private ones. Among other changes, annual borrowing limits for unsubsidized Stafford loans, which students can take out regardless of income, were raised by $2,000 and parents can now defer repayment of federal loans until after their child leaves school

The largest university in the US, Ohio State University, says it is not concerned with immediate impact. Bill Shkurti, Chief Financial Officer said, �The school's endowment has fallen by as much as 30% from $1.5 billion a year ago but accounts for just 2% of operating revenue.� His concerns were for next year.

Smaller universities have taken a bigger hit. Smaller private schools are downsizing to prepare for the fall semester of 2009 based on the number of applications filed. Since the economy has put a squash on �free money�, like grants, schools are aware that the last half of 2009 might be very painful

Private student loans are especially hard hit. Last year, 60 private lenders provided $19 billion to students. Now, 39 of those have stopped lending to students and the remaining firms have made it harder to borrow, according to, a website that tracks the industry.

On a bright note, no schools are known to have withdrawn pledged financial contributions. Harvard, Duke and Yale announced expanded aid for the fall semester of 2009.

Many people in the public are pressing colleges and universities to get their costs under control so that the student population will increase rather than decrease.