The current rapid inflation is raising concerns among many about the costs of everything, including tuition fees. Although inflation has decreased from its peak levels, it remains higher than it was for most of the past decade. This raises worries among many about the risk of recession. Recent surveys from Bankrate found that nearly half of economists now expect a recession, but consumers are still worried.
Education
Key statistics on recession
Higher education institutions that suffer from budget cuts are usually the first to be impacted by austerity measures during a recession.
Since colleges and universities — especially public ones — heavily rely on local and government funding, budget cuts are directly linked to rising tuition costs.
States like Washington, Alabama, and California, which were most heavily affected by the Great Recession, increased tuition fees by nearly $3,000 on average in the following years.
At the same time, states like Iowa, Maine, New York, and Maryland, which were less affected, raised tuition fees by less than half that amount.
Student enrollment in colleges tends to rise during economic downturns as many return to school in hopes of improving their job prospects.
During the 2023-2024 academic year, full-time in-state students at four-year public colleges paid an average of $11,260 in tuition and fees, while out-of-state students paid an average of $29,150.
Students at four-year private nonprofit institutions paid even more: $41,540 for tuition and fees.
Although the aid provided to undergraduate students per enrolled student has increased by 26 percent over the past decade, and student borrowing has continued to decline, Americans believe that reasonably priced college is not accessible to most people.
Recession vs. Depression
The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is widespread across the economy and lasts more than a few months.”
Recessions are characterized by a contraction of the country’s gross domestic product, which is the value of the goods and services produced or sold by the country. A recession can result from factors including prolonged inflation or stagflation, an asset bubble burst, or a stock market crash.
The latest recession in the United States was the COVID-19 recession in 2020, which lasted about two months, according to the National Bureau of Economic Research. The significant market uncertainty due to the pandemic’s effects, loss of investor confidence, and a sluggish manufacturing process led to this recession.
Previously, we had the Great Recession, which lasted 18 months in 2008, largely caused by the housing bubble burst.
On the other hand, a depression is simply a more severe recession. It lasts for years instead of months, with an even greater decline in economic activity. However, depressions are rare. The latest depression, the Great Depression, occurred between 1929 and 1939 and was largely the result of a sharp decline in stock prices in the United States.
College Fees and Recession: What to Expect
To understand what to expect from college prices during a recession, it is important to study the patterns that occurred in the past. College and the Great Recession
During the Great Recession, student enrollment in colleges rapidly increased, peaking at 11.65 million students nationwide in 2011 — followed by a decline that lasted for 10 years.
The share of educational revenue paid by undergraduate students increased by 31 percent between 2008 and 2012.
Those who graduated immediately after the Great Recession had an average student loan balance of $28,700 — $4,000 higher than those who graduated before the recession.
Continued
College tuition has been rising at a rate of $500 annually since the Great Recession.
Current Situation
Despite a long period of very high inflation and rising interest rates that typically signal a recession, economies have avoided this downturn. Economists’ opinions now vary on whether a recession is in the future, with 52 percent believing it can be avoided.
“It’s quite surprising that we have been on high alert for a recession for nearly two years now, and yet a recession in the broader U.S. economy has not occurred,” says Mark Hamrick, senior economic analyst at Bankrate. “Unfortunately, the odds of an economic contraction remain elevated.”
According to a study by the Lumina Foundation, college tuition prices rise during recessions. This is because higher education is one of the first areas that local and state governments cut spending on.
Nicole Smith, research professor and chief economist at the Georgetown University Center on Education and the Workforce, states that it’s difficult to predict how tuition costs for specific institutions will change during the next potential recession due to factors including the limits set by each state.
Smith says, “Depending on the state you’re in, state lawmakers may make a decision about how much tuition is allowed. In some cases, state education boards will make that decision. Overall, political organizations largely determine how tuition is transferred or not,” adding that regardless, college will cost more next year. Reasons include rising living costs and wages.
College Cost Projections
Here is a projection of how college costs will look in the coming years, based on a 3 percent annual increase in tuition, fees, and expenses:
Academic Year
Two-Year College
Public Four-Year College (In-State)
Public Four-Year College (Out-of-State)
Private Four-Year College
2024
$14,290.22
$24,666.44
$43,020.01
$56,683.99
2025
$14,718.93
$25,406.43
$44,310.61
$58,384.51
2026
$15,160.49
$26,168.63
$45,639.93
$60,136.04
2027
$15,615.31
$26,953.68
$47,009.13
$61,940.13
Source: Massachusetts Educational Financing Authority
Recession Watch List: States Most Likely to See Tuition Increases
While tuition costs rose in every state during the Great Recession, the states most affected saw even larger tuition increases due to greater budget cuts. For example, Iowa, one of the least affected states during the Great Recession, increased tuition by an average of $800 to $1,100 during the 2012-2013 academic year. At the same time, California, one of the most affected states, raised tuition by nearly $5,000 at some institutions.
According to a data analysis conducted by Merchant Maverick, the following states (listed alphabetically) are at risk for the largest tuition increases if a recession occurs due to factors making their economies more unstable than others. These factors include lower state reserves, higher unemployment rates, and shortages of affordable housing, among others.
Arizona
Arkansas
Florida
Hawaii
Idaho
Kentucky
Maine
Mississippi
Nevada
New Mexico
Since these states are less financially prepared to weather a recession compared to others, they may face larger budget cuts. This means that institutions in these states may have to raise tuition costs further to survive.
How to Prepare for a Recession
A recession is a natural part of the economic cycle, and there’s little individuals can do to escape it. However, there are some steps you can take to protect yourself as a college student and minimize the impact on your budget.
Carefully evaluate your major’s prospects
Smith says one of the things that can help you stand on your own if a recession occurs is knowing the expected return on investment for your desired major.
Smith says:
Smith: “You need to be proactive, make sure you’re getting the right advice so you know what the long-term opportunities are for that major in terms of job acquisition and integrating into the job market and the ways you can advance in your career path,” she adds that this research will help you determine how much to spend on your education based on the expected salary. It will also enable you to better prepare for your target job market after graduation.
Utilize your grant aid
Both scholarships and grants are types of aid given as gifts: money you don’t have to pay back. Taking advantage of these resources can significantly reduce college costs, including the amount you need to borrow to pay for your bachelor’s degree. This, in turn, will put you in a better financial position after graduation.
To apply for scholarships and grants, you must first fill out the FAFSA application. Then use a scholarship search tool, like Scholarships360 or Unigo, to find scholarships and grants for which you may be eligible and apply for as many as possible.
Borrow smartly
If you still need more money to cover school costs after utilizing free aid, your best option is to apply for federal student loans. Federal student loans offer protections, such as income-based repayment and access to forgiveness programs, that private student loans don’t provide. If you have poor credit or no credit, you’re also more likely to receive lower interest rates than private student loans.
Additionally, you do not need to pass a credit check to qualify for federal student loans – you just need to be in good academic standing and be enrolled in school at least part-time.
However, sometimes federal student loans may not be enough. If that’s the case, private student loans are your second-best option. To qualify, you’ll need good credit and stable income or a co-signer who meets these requirements. Before choosing a lender, compare multiple options to ensure you get the best terms and rates.
Whether you choose federal student loans or private student loans, crunch the numbers and only borrow what you need and can afford to repay after graduation. This is especially important if you expect to graduate during a recession.
Consider working part-time or a side job
Another way to lessen the recession’s impact on your budget is to work part-time to cover some college expenses. You can work a part-time job under a work-study program, which is a type of federal aid awarded based on priority. Or you can work part-time in a regular job.
Both will give you some hands-on work experience. You’ll have actual work experience and something to include on your resume, giving you an edge over your peers once you start looking for jobs after graduation.
Source: https://www.aol.com/paying-college-recession-statistics-predictions-224711081.html
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