Many first-time and returning students faced severe financial challenges as a result of decreased family incomes, declining house values, and large tuition hikes at their state schools during the Great Recession.
Students who are applying for the first time must pick where they will apply and enroll in college. During the Great Recession, we looked at the influence of sticker-price shock on college application behavior in a recent study. Students were less inclined to apply to state flagship universities when such institutions’ tuition increased significantly, according to our findings. Even while numerous state flagships met full financial need for low-income students and the price these students faced after subtracting grant help would have stayed the same, this effect was visible for all students.
The fact that low-income students reacted to price hikes that didn’t even affect them implies that tuition increases accompanying recessions have a broad chilling effect on college-bound students’ plans. At the very least, students should be aware that tuition hikes on the sticker may not necessarily reflect tuition increases for them.
During a recession, what happens to college students?
Although it may appear at first glance that recessions and economic conditions have little direct impact on college students, events in 2002 and early 2003 show that the economy’s health can have a significant impact on college students. The 2001 recession, as well as the stock market bear market from 2000 to 2002, contributed to the widespread state budget crises in 2003. The current budget crisis is having a significant influence on public education, both in college and in K-12. States cut educational services and increased student tuition and fees at the college level. The job market for students and graduates was also impacted by the 2001 recession and subsequent jobless recovery. So, let’s take a closer look at a few of these impacts.
Recessions, or periods when economic output falls rather than rises, often reduce tax receipts, particularly income taxes and, to a lesser extent, sales taxes, while increasing government spending on social safety net programs (jobless benefits, health and welfare programs). These dynamics combine to cause state budget shortfalls and tough financing decisions, as evidenced by the 2003 funding cuts for state-supported schools and universities, as well as reductions in student support.
The stock market’s decline from 2000 to 2002 (as illustrated in Chart 1) intensified the 2001 recession’s severe effects on educational services and college students. From the March 2000 peak of $18.3 trillion to December 2002, the bear market resulted in a very uncommon period of three consecutive annual decreases in stock market valuation and a loss on paper of nearly $6.7 trillion in market valuation. 1 The rapid drop in stock market valuation cut earnings on capital gains and stock options, lowering personal income and state tax receipts that help fund educational programs.
The bear market has also affected the returns on endowments that support education and programs at many private and public universities, as well as the value of stocks held by some parents to support their children’s education. As a result of the economic downturn, several private universities may be facing funding constraints.
Budget cuts can have a direct impact on education and students in a variety of ways.
2 As programs compete for lower funding, course offerings, programming, and student activities may be reduced. Student loan, employment, and aid funding opportunities may also be limited. As a result of the present financial shortfall, several colleges have raised tuition and fees as they try to make ends meet. These indirect repercussions of the recession on college programs, however, are not the only ways in which the recession has impacted college students.
Students faced a more difficult economic climate as members of the labor force during the 2001 recession and the “jobless” expansion that began in November 2001 and continued into 2003. The recession of 2001 led in a predicted rise in the unemployment rate among college students. According to the National Center for Educational Statistics and the American Council on Education, around 80% of all undergraduates work while attending college. 3 Unemployment rates for people aged 16 to 19 and 20 to 24, the demographic categories that constitute the majority of college students, generally climb sharply during recessions (shown by shaded columns on the chart) and into the early stages of recovery, as seen in Chart 2. In the soft labor market, not only current students, but also recent college grads, have discovered less job options. During an expansion, however, the unemployed situation usually improves, as shown in the graph.
What does a recession mean for students in college?
Experts predicted a recession in the United States by 2021 even before the Coronavirus outbreak rocked the country. With social distance rules in place to slow the virus’ spread, an economic collapse appears inescapable. Still, there are unanswered questions. If you’re a student or recently graduated from college, you’re undoubtedly wondering how the impending recession will effect you and what you can do to make the best of it.
What Is an Economic Recession?
Everyone understands that a recession is terrible, but what exactly does it imply? A recession, according to most economists, is defined as a sustained drop in economic activity that lasts longer than a few months. In general, this means that customers are spending less money and that firms are hiring fewer people. Higher unemployment rates, a drop in retail sales, and a drop in real income are all reliable indications of a recession.
Despite White House assurances that the economy is strong, most economists expect the US will enter recession by 2021, according to a new survey.
How Likely Is A Coronavirus Recession?
A coronavirus recession is unavoidable, according to most economists. People are less likely to spend money at restaurants, pubs, and local stores as a result of statewide “stay-at-home orders.” This has a direct impact on the service business. Other industries, such as travel and entertainment, are suffering even more as a result of the ban on large gatherings.
Of course, rising unemployment means that even after the quarantine is lifted, customers will have little discretionary spending. In fact, long after some sense of normalcy has been restored, Americans may continue to tighten their belts.
When a recession strikes, almost everyone feels the effects to some extent. College students and recent graduates, on the other hand, are frequently the ones that suffer the most. In this post, we’ll go through five of the most bleak truths you’ll confront, as well as how to find the silver lining.
Reality #1: You May Have to Finish School Online
Colleges and institutions around the country have been forced to transfer their lessons online due to social distancing tactics. This can be jarring for students who are used to attending lectures in person and depending on study groups to prepare for tests. At the other end of the scale, students who do not have access to a computer or the Internet will be forced to scrounge together the resources required for distant education.
The transition to remote learning may be difficult for traditional on-campus students, but those who are willing and able to adjust will reap long-term benefits. Employers highlighted high-tech aptitudes as one of the most highly-prioritized abilities they search for during the hiring process even before Covid-19 revolutionized our working lives.
We may expect more organizations to understand the benefits of telecommuting as the crisis persists. Even once people are allowed to resume their usual lives, it’s not a far-fetched thought to believe that the professional landscape will be altered in the long run. Completing your degree online may assist you in honing these in-demand IT skills and preparing you for the new workforce.
Distance learning necessitates a high level of self-discipline and time managementsoft skills that will make you more marketable once the economy recovers.
Reality #2: You’ll Still Pay Full Tuition for Online Classes
Even as institutions close their physical doors to students, the vast majority will continue to charge full tuition, so don’t anticipate a discount simply because your classes have migrated online. If you normally live on campus, you may be eligible for a partial refund on your room and board, but your tuition and fees will not change.
Because you’re still paying full tuition for your studies, you should continue to give them your all. As tempting as it may be to think of this as an extended vacation, you will not be doing yourself any favors by doing so. Actually, you’ll be deceiving yourself.
Distance learning necessitates a significant amount of initiative. Many people believe that you will get out of it what you put into it. Keep your academics at the top of your priority list. The only part of your school regimen you should cut out is your commute.
Reality#3: You May Take a Pay-Cut or Even Lose Your Part-Time Job
First, the good news: If you work on campus as part of a federal work-study program, you’ll probably keep your employment even if you can’t do your regular responsibilities. Colleges and universities have been given permission by the Office of Postsecondary Education to continue paying Federal Work Studies (FWS) students their normal rate, whether or not they can continue to complete their obligations online.
However, if you work off-campus, you might not be so fortunate. Even if you think you’ll be able to keep your part-time job throughout the recession, it’s best to plan for the worst. The truth is that recessions disproportionately affect low-wage employees and college students. In the event of a financial crisis, companies are more inclined to lay off part-time employees first. Employees with the least amount of experience are also among the most likely to lose their employment.
Furthermore, certain industries, such as hospitality and food service, are more affected than others. These are the industries where college students are most likely to work.
If you are laid off or take a pay reduction, the best thing you can do is embrace the concept of education as a goal. If your employment provided you with a sense of fulfillment or identity, try to channel that energy into your studies. The finest thing you can do for your mental health is to do this. Taking this method can help you keep your sanity during the pandemic and the ensuing recession. Rather than focusing on the fact that you aren’t working, try to embrace the extra time you have to devote to your studies.
Workers who have been laid off or furloughed and have been offered education and training as part of their severance packages or furlough periods are more likely to return to work when the situation improves.
Of course, your sanity won’t pay the bills by itself. Let’s face it: missing wages will result in financial difficulty at the end of the day. This is not the time for arrogance. While there are things you can do to cut costs and tighten your budget, it’s unlikely that you’ll be able to do so on your own. Accept whatever assistance that is offered to you, whether from your parents, your community, or the government.
Reality #4: You May Have to Keep Your Current Job After Graduation
If you’re fortunate enough to keep your employment while pursuing your degree, expect to keep it after graduationat least for the time being. Recent college graduates have not fared well in the past when there has been a recession. In fact, during the Great Recession just over a decade ago, the National Association of Colleges and Employers reported a 22% fall in employment of fresh-out-of-university workers. There’s no reason to expect that new graduates will be treated any differently during this crisis.
Translation? The industry you’ve been studying for the past four years may not be ready for you after you graduate. In all likelihood, it will take a year or two before your degree pays off. During this time, you may be required to keep your current work, even if it is unrelated to the field for which you have been preparing.
Even if the lemons are bitter, you can still make lemonade; you’ll just have to be inventive. Recent college graduates who have been compelled to work in low-paying jobs due to the recession have options. You may utilize this opportunity to further your knowledge by taking professional development classes, becoming certified in a specialist field, or even enrolling in graduate school.
Reality #5: You May Have to Accept a Low-Paying Position
During an economic crisis, some industries perform better than others, so there’s still a chance you’ll be hired in your profession of choice after graduation. Even if you strike it rich, you should keep your wage expectations in check. Sign-on bonuses are unlikely to be offered by employers. It’s possible that they won’t be able to pay their new recruits the same wages as before the recession.
There are still methods to make ends meet if you’re not getting paid what you expected as a new job. Getting a side job is one of your greatest possibilities. Freelancers and “gigsters,” according to early forecasts, may fare the best during the recession. This is good news for college students and recent graduates since it suggests that, while full-time work may be difficult to come by, there are still ways to earn money and obtain professional experience.
The economy will recover from the slump brought on by the virus. How long the financial crisis will endure and how terrible it will become is determined by how quickly we can contain the pandemic. There are still a lot of unanswered questions. Fortunately, there are several recession-proof practices you can put in place right now to help you prepare for life after quarantine.
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Do people return to college during a downturn?
You’re not alone if you’re considering graduate school right now. Historically, college admissions have risen during economic downturns when job searchers opt to bypass the bleak job market in favor of pursuing their passions in higher education.
Why does college enrolment increase during a recession?
Historically, institutions have served as economic shock absorbers during downturns: when the supply of jobs declines, college enrollments grow.
Because of the scarcity of jobs and poor earnings, college has a lower “opportunity cost.” During a boom, students must forego high income in order to attend college. Because the cost of losing those earnings is smaller during a bust, more people attend education.
Many adult workers should retool their skills during a recession, and young individuals should stay in school rather than start their careers in a volatile labor market. According to research, young individuals who begin their jobs during a recession face lower starting salaries.
Once the economy rebounds, the low entry salaries translate into lesser annual raises. Worse, the consequences last decades, punishing a generation of wage earners. Getting more students into college during a recession helps to mitigate the negative impact on earnings that all of these people would have if they were instead looking for work.
What impact does the economic downturn have on education?
Negative effect 1: As adult income declines, it becomes more difficult for parents to cover direct educational costs such as tuition, fees, books, supplies, uniforms, and private tutoring. As a result, educational outcomes are affected because the youngster is either absent from school or underprepared for it.
What impact did the 2008 recession have on colleges?
Higher education has a peculiar characteristic in that it runs in the opposite direction of the economy. When the economy is stagnant, demand for college grows as unemployed people decide to return to school in order to enhance their career prospects. Since the coronavirus outbreak appears to be causing a new recession right now, I thought it might be helpful to review what occurred to schools and institutions during the Great Recession of 2008 to help us think through what could or might not happen this time.
From 15.6 million undergraduate students in the fall of 2007 to a peak of 18.1 million students in the fall of 2010, the number of students enrolled in college increased by about 2.5 million, or nearly 16 percent. According to Doug Shapiro, executive research director of the National Student Clearinghouse Research Center, the majority of the increase was driven by older individuals rather than traditional college-age students who had recently graduated from high school. These seniors primarily attended two-year community colleges and for-profit online schools like University of Phoenix.
Back-to-school shopping did not happen overnight. There was a gap of 18 months. Workers were laid off first. They then ran out of jobless benefits. “When they realize they won’t be able to find another job, they begin to consider going back to school, according to Shapiro. “And it takes them a year and a half to two years to get through the entire process of selecting a school and getting into one.”
What was the impact of the Great Recession on education?
These funding deficits might force school districts to make considerably deeper cuts than they did in the aftermath of the Great Recession, resulting in higher class sizes, stagnant teacher salaries, and outmoded learning resources. The consequences for public education could be disastrous.
What impact did the Great Recession have on higher education?
Since the financial crisis, the amount of student debt owed in the United States has more than doubled, to $1.5 trillion. The Great Recession’s second long-term impact on higher education was a significant shift in the majors that students chose in college. It’s all about the work for this generation of kids.
What happened during the Great Recession of 2008?
The Great Recession, which ran from December 2007 to June 2009, was one of the worst economic downturns in US history. The economic crisis was precipitated by the collapse of the housing market, which was fueled by low interest rates, cheap lending, poor regulation, and hazardous subprime mortgages.
What accounts for the low college enrollment?
The causes for the reduction in enrolment have been widely addressed dropping birthrates, broad immediate employment availability, and increased public skepticism of the need for higher education but the long-term consequences have received less attention.