Crisis. Recession. Collapse. These recent buzz words present in almost every article about the failing economy are more than just technical jargon; they have a far-reaching impact on the lives of students who are concerned about the future of their education.
Eric Carlson, a second-year theater student, is currently taking out a private student loan from Sallie Mae, and is worried that he will not be able to get a loan next year as a result of the financial crisis.
“If I can’t take out a loan, I can’t continue with school. I’ll have to drop out,” Carlson said.
While substantive media attention on the economy only began several weeks ago, Carlson saw its impact over the summer when he was denied a loan from Chase Education Finance because they toughened their credit qualifications.
He has already begun taking measures to save money in the event that he does have to face a tougher financial situation.
“As I work, I split half my check into savings and the other half I use for spending … this is more as of late,” Carlson said.
Indeed, many experts predict impacts on both student aid and general education, although the degree of the impact differs between different economists.
The crisis is the result of the failure of subprime mortgages, which are generally made with no down payment for the entire value of the house, said Lee Ohanian, professor of economics.
“These banks are … having problems financing short-term credit,” Ohanian said.
While these issues have a number of wide-ranging impacts, economic analysts and students are speculating the difficulties they may face regarding their student loans.
Juan Abenojar, assistant director at the financial aid office, said that students who are taking out government-regulated loans under the Federal Family Education Loan Program should not be concerned because “there is always somebody to pay those loans.”
“We are not concerned about accessibility to student loans,” Abenojar said.
Students who are taking out non-government regulated private loans may see more of an impact, said Jan Schneider, assistant professor of finance at the Anderson School of Business.
Schneider said students who have already taken out loans may find them more difficult to pay back if there is an economic recession while those who want to take out private in the future may have worse terms in their loans.
Armando Huipe, a second-year biochemistry student, tried to take out a private loan because the loans he received from the school were not enough to cover the full cost of his education.
Though Huipe did not actually take out a loan because he could not find a co-signer, he is afraid that the crisis will affect his ability to do so in the future.
“It will probably be harder. I am worried about getting my future loans,” Huipe said.
Even students who are currently taking out government regulated student loans, are generally concerned about their future.
“They are saying that the availability of loans is diminishing, so how are we supposed to pay for school?” said Esmeralda Pelayo, a second-year undeclared student.
But Ohanian said the impact of the crisis on students may extend beyond student loans and also be seen generally in education because a weakening state budget, from which the UC system receives funding, itself has become a symptom of the greater problem.
“A lot of revenue coming in to the state is from capital gains on sales and homes,” Ohanian said. He also said that as the result of the mortgage crisis, there are fewer home sales, and thus a reduction in overall revenue for the state budget, including the portion spent on education.
“Our budget is down. That’s going to make it difficult for us to hire faculty, adjunct faculty… “ Ohanian said.
But an official at the University of California Office of the President who asked that her name not be included, said she has no information leading her to believe that either the UC system at large, or UC students on financial aid, will be facing any serious problems as a result of the state budget.
She explained that the university is not actively making plans to adjust for the budget changes at this point; they are waiting to see what happens over the coming weeks and months before deciding whether or not to take action.
But in the event of an economic recession, Ohanian said young people are in the best position to overcome difficult situations.
“They are going to weather this much better than the 55-year-old person in the banking sector who has few career options,” Ohanian said.