Economic turbulence hits college students

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.

As 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.

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.

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 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 Cobian, a sophomore majoring in political science at the school, is planning to apply for more scholarships and student loans during Christmas break. Her father works for a contractor laying cable and operating heavy machinery - a business that's been hit as construction has slowed. Cobian 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.

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 Lima about $200 per semester, so the 23-year-old Army veteran is looking for another job.

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 has 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.

Meanwhile Caitlin O'Brien, who has 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 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.