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How Is Coronavirus (COVID-19) Affecting Student Finances And Borrowing
COVID-19 will change the college scene forever. There will be both positives and negatives that come out of this. If you’re a student and you’re wise, it will have a positive financial impact.
Student Debt & University Perspective
As you already know, college costs have been sky high. This has led to an enormous amount of student debt. In 1971-2912, the average tuition and fees at a private four-year college was $11,540 inflation-adjusted (using today’s money). For the 2019-2020, the average tuition and fees at a private four-year college is $36,880.
Look at the big picture on the following numbers. In 1971-1972, the average tuition and fees for a public four-year college was $2,710 inflation-adjusted (using today’s money). In 2019-2010, the average tuition and fees for a public four-year college is $7,730.
COVID-19 or not, what do those numbers tell you? They should tell you that you should strongly consider a public four-year college. The vast majority of employers don’t look at the school you attended. They are going to want someone skilled and hungry. You don’t need a degree at a big-name school for that. That’s your first way to save money. If your debt is $7,730, that’s going to be a heck of a lot different than $36,880! And that’s not the only reason to choose a public four-year school.
Consider the following numbers. Due to COVID-19, the Pennsylvania State System of Higher Education and the University of Wisconsin at Madison expect to lose $100 million, the University of Arizona expects to lose $250 million, and the University of Michigan expects to lose $1 billion.
Some of these bigger schools only have one solution to make up for lost revenue, which is to increase tuition. The bigger schools are laying-off staff, freezing hiring, and pausing capital expenditures. They’re in desperation mode, and they know that international and out-of-state student enrollment will decrease. On top of that, sports play a big role in their entire ecosystem. Without NCAA sports, that entire ecosystem falls apart. It’s going to be a changing landscape.
As these bigger schools increase tuition and struggle, smaller schools will be reducing tuition to attract more students. And students will begin to realize that there is no need to travel to a big-name school and pay extra money. Many of them will stay local to save money. Staying local doesn’t negate the social life, and local doesn’t necessarily mean your hometown. It means within the state in this instance. Therefore, you can save money and still make new friends while being hours away from home. You can always drive back for a weekend or the holidays.
If you want the simple version on how COVID-19 is affecting students, if the student is wise, they will significantly reduce their costs by attending a public four-year school opposed to a large private school. There is no sense in attending the bigger private school anyway since most employers don’t pay attention to where you went to school. They’re paying attention to your skillset and how you can help them. Of course, there are exceptions. If there is a specific skill you’re trying to develop and you can only find the best courses at a private four-year school, then it might be worth the extra investment. Just remember that debt is Enemy #1 when it comes to finances.
The Cares Act has positively impacting students. Through the Cares Act, from March 13 through September, Federal and student loan payments and interest have been paused (excluding private loans). It’s highly recommended that you take this time to work harder so you can pay off the principal of your loan faster. This will free up money for you in the near future. You will be happy you did it. Also don’t be surprised if there is an extension on this. Therefore, it might not be too late.
The Bottom Line
If you play this right, COVID-19 can actually help you more than it will hurt you in regards to student finances and borrowing. It’s not about the hand you’re dealt, it’s about how you play that hand.
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