The Recession and a Student - Essay Example

Introduction A recession is an evident deceleration in economic activities experienced by a country. It is measured by several indicators such as unemployment and inflation rate. The events that lead to the occurrence of recession cannot be easily stated as a formula. The entire economy of the world has been with in the grip of economic slowdown. The major economies like that of United States, Germany, Japan and all other developed nations suffered the most simply because they have enjoyed the fruits of the good life whereas the developing countries have always suffered and may have felt the effects of recession, only not as much as the mentioned power countries. As with the boom in the information technology and the communication process, the one part of the world is coupled with the other parts, therefore as one economy started getting affected, the other parts were also affected. The debate as to what really causes a recession could go on and on, but it really cannot go as far back to a single cause. Like most problems, they spring from not just one but a series of events. As a case in point, the current recession has been associated with the unsustainable lending practices in the United States, the real estate bubble, and the global explosion of oil and commodity prices, all of which occurred almost simultaneously. When the recession of 2008 hit, everyone was taken by surprise. Industries suffered; people lost jobs; jobs were scarce, and times were tough. A lot of attention naturally focused on how businesses were doing and how the workforce was affected. Most, if not all, of both written and televised news about the impact of the recession were addressed to businessmen or companies. There is, however, another sector of the society which was not given much attention, information, and most of all, the assurance about support that they deserved – college students. The Recession and a Student A student of today basically enrolls himself to higher education with the aim to get a white collar job with any of the leading companies in the world. Going corporate has been the dream job especially for fresh graduates who are idealists in their own right. But as the global melt down and the financial recession ultimately slowed down the global growth and made bankrupt some of the leading business houses which had been erect and tall for more than hundred years, the objective of getting the desired job has been the stuff of things easier said than done – it just became harder and harder to fulfill as the world went deeper and deeper into the effects of recession. As the effects of the financial failure started to unearth since December 2007, job suspensions went on an all time high. In February 2008, more than 60,000 jobs were estimated to get terminated which went up to 533,000 jobs in the single month of November 2009 (Uchitelle, 2008). What used to be the promise of a ticket to a good job and a successful future no longer seemed promising. With such condition in the job market, it is definitely tough for the fresh graduate, barely out of the school to stay on high hopes. Block (2009), a USA Today writer, very eloquently expressed this fear: For years, an article of faith in this country has been that college is the gateway to a better life. So deeply held is this belief that many students… borrow tens of thousands of dollars to attend prestigious public or private universities. But as the worst recession since World War II trudges into its 21st month, many graduates are discovering that the college payoff could be a long time coming — if it comes at all (para. 5). So great are the consequences for students, that it is but high time the spotlight focuses on them too. Needless to say, most college students are on a tight budget. Meticulous budgeting is required for spending money. With the prices of common commodities rising, college students have a greater challenge to make ends meet. That is not yet counting the various school expenses for assignments, projects, and all other requirements related to the courses they are taking up. That brings us to tackle the most pressing problem for students: tuition fees. Those who qualify for a scholarship are fortunate since they get the support that is most needed in these times. It is, however, general knowledge that not everyone qualifies for these scholarships and it is very hard to get one. Taufik Hidajat is one of the fortunate ones who got a scholarship from his university. But just how lucky was he really? Hidajat is an international student from Indonesia and he says that while he was lucky to land the scholarship, it is still very expensive for him to pay the remainder of the tuition fees not shouldered by his scholarship. His father needs to take out of his own pocket at least $10,000 per semester to pay the remaining tuition fees and the living cost in San Francisco since his scholarship only covers an average of $3000 dollars per year (T.Hidajat, personal communication, October 28, 2009). Since not everyone is fortunate enough to get scholarships, students have other ways to pay for their academic fees. In the past, many students used to get by with student loans and then pay the loan back after graduation. This used to be the perfect setup, until the recession. The increasing cost of the education has compelled the students and their guardians to resort to the financial houses to sponsor the higher education. Amidst financial recession, the course fees of many the reputed universities has increased considerably on year-to-year basis though the figures suggest that is has been lesser than what it had been five years back. The management of such colleges also claims that once the student aids are discounted, the cost of education is really cheap in the leading universities (Associated Press, 2009). In a comprehensive report by the non-profit organization College Board (2006), the typical cost of tuition and all other expenses for students during the academic year 2006-07 are generally given as follows: 1. Average total tuition and fees at four-year public colleges and universities… are $5,836. Average total charges, including tuition, fees, room, and board, are $12,796; while the 2. Average total tuition and fees at four-year private colleges and universities in 2006-07 are $22,218. Average total charges, including tuition, fees, room, and board are $30,367. (p. 4) These figures are from a time before the recession hit. Associated Press (2009) reports that in the midst of the recession, the average tuition fees at four-year public colleges are $7,020 while fees at private colleges amount to $26,273; room and board is charged at an additional $377 to $420 than usual price, and the “average surcharge in for full-time out-of-state students at public four-year institutions is $11,528” (as cited in “2009-10 College Prices”, 2009, Sticker Price vs. Affordability section). As already mentioned over and over in this paper, only a few students get scholarships to help them to pay the figures mentioned above that is why there is an overall total of 58.8 percent of students coming from both public and private schools borrowing (“Student Loans,” 2009). As the cost of higher education has witnessed steady increase, the students took shelter under the educational loan. But because of the financial recession, most of the educational institutions failed to provide the desired jobs (both in terms of salary as well as designation) to the outgoing industry. It further influenced the pay back of the loan that they took for their education. The figures ratified the fact as the default rate in the educational loan increased. It must however be noted that note that “the College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly originated subsidized Stafford loans for undergraduate students to 6.0% (2008-09), 5.6% (2009-10), 4.5% (2010-11) and 3.4% (2011-12), with a return to 6.8% in 2012-13. These cuts are available only to undergraduate students, not graduate students, and only for subsidized Stafford loans, not unsubsidized Stafford loans. Those loans remain at a fixed rate of 6.8%” (“Education Loan Interest Rates,” 2009). Other loans like the parent loans or PLUS loans distributed after “July 1, 2006 is a fixed rate of 8.5% in the FFEL program and 7.9% in the Direct Loan program” (“Student Loans,” 2009). Though the default rate in the educational loan was lesser than other forms of loans, but still it increased in terms of year-on year comparison. According to the figures of U.S. Department of Education, almost a quarter million loan borrowers were into default among those who took loan in between September 30, 2007 to September 30, 2008 (Singletary, 2009). Block (2009) writes about Darla Horn, who graduated with a double major in journalism and anthropology from the State University of New York in Purchase. Horn shares that she did not give much thought to how much college would cost because all she wanted was to get out of where she grew up. Because she did not qualify for financial aid, she took out student loans and eventually graduated, though she was more than $80,000 in debt. Paying was okay until she lost her job due to the recession. Now self-employed, Horn is struggling to handle her loan payments, and she says, “to this day, I have yet to see the complete value of my education” (as cited in Block, 2009, para.4). Now, Horn’s - and all of the other students who got through and are currently going through college’s - ability to pay back her debt after graduation has been compromised by the nation’s astounding unemployment statistics. Yes, it is even more difficult to land a good job nowadays. Harris (2009) writes about a student who may have to live with parents again after graduation because renting a place would mean one more part-time job and freelance work, which is now hard to come by. The graphics design major, Angie Guzman, said that among her friends who graduated the previous semester, only three “out of a class of 15 graphic designers have full-time jobs right now... Statistics are kind of hard right now. Its a scary concept, recession, because I already knew that it was going to be difficult to get a job once I graduate, and its just another obstacle I have to combat in order to get to where I need to go” (as cited in Harris, 2009, para. 4). The recession has not only affected students struggling to pay tuition fees but even college graduates as well who ideally should be out there climbing the corporate ladder they’ve always dreamt of. Now instead comes the downward spiral that instead of going up the said ladder, graduates are crashing in their parents’ couch. Graduates are not only fighting fellow graduates for a job but all other people who list their jobs due to recession. It is even more a tough, competitive world out there. Even if the economic recession has almost crushed the hopes of a better future for most of the college students, yet contrary to the popular belief, most of the colleges and the universities have experienced higher number of applications for admissions. The reason for this has been the lesser opportunity cost of the higher education. If there would not have been the financial crisis and the job market collapse, many of the students would have opted for work as they could easily earn quick money along with relevant work experience. But as the markets slowed down and there was no much real chance of industry interface, students joined universities and colleges to utilize the time and attain higher degrees. This has resulted in increased application for admissions amidst recession (Paulsen & Smart). Among the few who did not experience higher number of applicants for admissions is Mills College. “We were down by 8% on our enrolment statistics for some of the courses we offer. Aside from being bad for business, it is also sad to see our students go, especially the good ones. One of our classes which we used to have to open up another section just to accommodate the number of students enrolled now only has 75 percent of the maximum capacity of a single class,” says Professor Doug Greenberg ((D. Greenberg, personal communication, November 17, 2009).) Greenberg says that the university is doing all that they can to convince the students to stay in school as they are not also sure to get a good-payin g job anyway. Some students were convinced but only took up half or three-fourths of their usual academic load. “Some other students, I can really see they want to be convinced but they just shrugged their shoulders and told me that they will take their chances in finding the job because they really can’t afford it anymore. They were already deep in debt and they doubted if adding more to that is wise. What is so sad is to see our students, who I knew dreamed of corporate jobs now wander all over the city to find any job that pays, any job even if it undermines them, ” (D. Greenberg, personal communication, November 17, 2009). Aside from the fees to be paid in school and debts to be paid after, another problem that faces students nowadays is finding internships that pay. Palmer (2009) also reminds students seeking internships to “be prepared for a harder than usual search and expect positions that may have been paid in the past to become volunteer. While businesses know how important it is to get students primed for future employment, internship positions may be the first to go as budgets shrink and companies consider downsizing.” As the recession hit thousands of businesses, it is just but natural for companies to cut on all costs possible and what’s to stop them from doing that to interns when job terminations are rising exponentially? What used to be the training ground for future employment, where one works, gets paid, and uses the salary to pay for expenses may be no more. What used to be a “problem less” for students has become a “problem more.” Michael Soulivan, a senior electronics engineering student in San Francisco State University claims that in their school, tuition fees are low but many students are still struggling because “academic stress has been compounded by financial stress. Yes, we do have low tuition fees but the projects required of electronic courses also require ample amounts of money. Plus our department still has to look for sponsors for additional equipments to accommodate the number of students enrolled. A lot of students did not come back this semester because the cost of living far from home is too much (M. Soulivan, personal communication, October 21, 2009). With the recession, acquirement of equipments for schools and laboratories are hard because sponsors are also suffering from the recession and may be having second thoughts if sponsorship is still for their benefit. Conclusion Though financial recession has been the driving factor for last couple of years, yet the recession would not stay for long, at least not for ever. The economy would revive again and so would the job market. The best of the talents would definitely be recognized by the industry. A college student of today must keep faith upon his abilities to succeed in future. What is the best thing for a college student faced with these dilemmas? Cliché as it seems, the best thing for current college students to do is to remain optimistic. Working hard for studies is still worth it because most schools give benefits and discounts to students with good academic standing. There is also greater possibility of landing a scholarship if one has good grades. Block (2009) quotes Sandy Baum, senior analyst for the non-profit association College Board, “Unemployment among college graduates is still half that of high school graduates. A college education payoff is at least as high as it was before the recession.” This must be what was in mind for Kate Hayes, who remarked, “I will stay in school and get that degree. It is hard out there right now and I think that this is the best I can do, stay in school. I’m accumulating debt yes but I firmly believe I’ll be able to pay for it in time. In fact, I’m starting right now, I work online to pay my rent and other expenses. If students just persevere like me, there are actually a lot of opportunities for them to earn some money. It is not just a matter of looking but of looking at the right place” (K. Hates, personal communication, November 30, 2009). College graduates apparently are still less likely to struggle. While tuition fees are high and paying off the debts after graduation is especially hard because aside from the interest, there is that depressing unemployment rate of 10.2% in October 2009 (“Employment Situation Summary,” 2009) which defines whether one finds a job to pay for the debts, a 2007 College Board Study, Education Pays, reports that “people with a bachelors degree earn over 60 percent more than those with only a high school diploma. Over a lifetime, the gap in earning potential between [them] is more than $800,000. In other words, whatever sacrifices you make for your college education in the short term are more than repaid in the long term” (“2009-10 College Prices”, 2009). That is a thought that all college students must ponder. However they must also look at the other side: are they willing to cover the cost even though it would not be as easy as it used to be to pay it off in exchange for the promise of faring better than high school graduates? If the answer is yes, then work it really hard. But if doubt is lingering, then think it further before coming to a final decision. Anyway, in the end, it will not be just a college diploma that will dictate the so-called “better future” and make the climb to the corporate ladder easier but a good attitude and firm belief in what you can do, with or without a college diploma. References Associated Press, (2009 October 23). College tuition is up sharply amid recession. Sifybusiness. Retrieved from http://sify.com/finance/college-tuition-is-up-sharply-amid-recession-news-business-jkuuE4fcgih.html Block, S (August 31, 2009). In a recession, is college worth it? Fear of debt changes plans. Retrieved from http://www.usatoday.com/money/perfi/college/2009-08-30-college-costs-recession_N.htm College Board. (2006). Trends in College Pricing (2nd ed.). Washington, D.C. Education Loan Interest Rates. Retrieved from http://www.finaid.org/interest.cgi.htm Employment Situation Summary. The U.S. Bureau of Labor Statistics. Retrieved from http://www.bls.gov/bls/newsrels.htm Harris, C. (2008, March 3). Surviving A Recession: What Soon-To-Be College Grads Need To Know. Retrieved from http://www.mtv.com/news/articles/1582672/20080303/id_0.jhtml Palmer, D. (2008, March 27). Recession: How it Effects College Students. Retrieved from http://media.www.hartfordinformer.com/media/storage/paper146/news/2008/03/27/Opinions/Recession.How.It.Effects.College.Students-3293768-page2.shtml Paulsen, M. B. & Smart, J. C. (2001). The finance of higher education: theory, research, policy, and practice. Algora Publishing, 2001. Singletary, M. (2009, September 20). After College, Student-Loan Sinkhole Awaits. The Washington Post. Student Loans. Retrieved from http://www.finaid.org/ FinAid _ Student Loans.htm Uchitelle (2008, December 5). U.S. Loses 533,000 Jobs in Biggest Drop Since 1974. Economy. The New York Times. 2009-10 College Prices (2009). The College Board. 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