Balancing Act: How Students at Elon University are Managing Under the Current Economic Conditions

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By Carolyn VanBrocklin

The economy has “fallen off a cliff,” billionaire Warren Buffet said on March 9, 2009. Since 2007, the economy has seen a huge drop.  The S&P 500 alone has dropped about 35.7% since January 2008.  Some think these could be the worst economic conditions since the Great Depression.  Even at Elon University in North Carolina, students are feeling the effects of the economy.

Anna Davis at work in the SUB office.

Junior corporate communications major Anna Davis works two jobs: one in the Financial Planning office and the other as a sound technician at Lighthouse Tavern, the local bar, working between 10 and 12 hours a week.  Davis uses the money she receives from jobs to pay for every day expenses.  “If there’s anything left over that I can save, then I put it toward my savings account and paying off loans,” Davis said.

‘It all just spirals out of control’

The current economic recession dates back to the fall of 2007.  Economics professor Steve DeLoach explains that the driving force was the housing prices.  As housing prices went up, interest rates decreased.  A housing bubble emerged and lenders gave money even to those who were not in a position to pay back the loans on time.

“Then, like with any bubble, things became overvalued,” DeLoach said.

As the banks started having trouble because people were not paying off their loans, they were wary of making any more loans.  According to DeLoach, this leads to a credit crunch.  Small businesses then are affected when they can’t get the money to keep up their inventory, and thus their businesses, something DeLoach said became apparent around the Christmas shopping season last year.

Then these small businesses start failing “and it all just spirals out of control,” DeLoach said.

DeLoach said that most people have assets tied up in stocks and houses.  Houses are often the biggest assets owned, and when the prices of houses were high “we all felt rich and we consumed a lot.  When the housing prices started going down we feel poor and consumers stop spending,” he said.

‘I was totally overwhelmed’

“Personally I haven’t been affected by the economy but the people that I rely on have been, including my parents and extended family,” Anna Davis said.

Her grandfather paid for most of her college education, but the economy has changed that.  “This past fall he can’t do anymore because with the turn in the economy after October, his stock went down significantly,” Davis said.

Davis and her parents relied on her grandfather’s generosity because they were not in a situation where they could afford to pay Elon’s tuition on their own.

Her father used to work in home development, but “for the past couple of years the real estate market is basically non-existent,” Davis said.  Her mother must support the family on a public school teacher’s salary.

As a result, Davis had to turn to receiving a Stafford loan, one of the most popular loans for college students.

“I do earn money for all of my expenses that I’m responsible for,” Davis said.  The current situation has made her more conscious of money.

Davis’ financial situation has caused her to put pressure on herself to take the burden off of those that provide for her otherwise.

“I was totally overwhelmed when I heard that my grandfather wasn’t going to be able to pay for school.  I felt guilty for choosing to go to a school that was economically out of my parents’ reach,” Davis said.  “And I felt like I personally had to be responsible for the rest of my schooling experiences, which was very intimidating.”

Trends in tuition, loans and debt

Compared to other North Carolina colleges, Elon ranks fifth highest in terms of tuition for the 2008 to 2009 academic year. Davidson and Wake Forest ranked first and second, respectively.

The College Board’s 2008 publication of trends in college pricing showed that across the nation there has been a steady increase in tuition rates.  This year Elon raised its tuition by $1,413, one the smallest increases at 5.9 percent.  This was consistent with the rest of the nation’s increase.

At Elon University, the loans and scholarships remain mostly stable according to Pat Murphy of the Financial Aid office.  If a student comes in looking for financial aid, Murphy’s first step is to look for federal loans.

Trends in average student aid per full time equivalent since 1987, courtesy of the College Board's 2008 publication on trends in student aid.

For a clearer version of this graph please click here for the full report, or here for just the image.

According to the College Board, the average debt per borrower and per bachelor’s degree recipient has not changed much, although the debt of the recipient of a bachelor’s degree is significantly lower.  In addition, state grant aid to undergraduate students increased by 76% in inflation-adjusted dollars over the decade from 1996-97 to 2006-07, rising sharply in the last few years.

Trends in average debt per borrower (blue) and per bachelor's degree recipient (green) since 2001, courtesy of the College Board's 2008 publication on trends in student aid.

For a clearer version of this graph please click here for the full report, or here for just the image.

According to the College Board’s 2008 data book, “as college prices have escalated while family income growth has stalled, students have had to rely more on grants and loans to finance their education.”  As a result, student debt has increased as well.

Obama’s plan for higher education

During the 2008 election process, President Obama addressed issues with higher education.  Mainly, he hopes to increase federal financial aid and make it easier to apply for aid.

According to the Barack Obama website, the average college student leaves college with over $19,000 in debt.  His plan is to make college affordable by adding more money to the Pell Grant, according to a January 3, 2009 article in The New York Times.

Obama’s plans are also focused on the work study program.  Under his plan, the proportion of Federal Work-Study slots would increase and the slots that colleges must devote to community service jobs from seven to 25 percent.  The campaign estimates the requirement would help more than 200,000 students take part in community service each year in college.

Obama also proposed spending $2.5 billion over five years to raise graduation rates, which he believes are too low, according to a February 26, 2009 article in USA Today.

Parents feel the pinch

Around the country, parents are also feeling the effects of the changes in the economy.  According to a study by Inside Higher Ed, an average of 30% of parents from varying levels of income said they would need to reduce their contribution to their child’s college.

A little over eight percent of parents said they would consider taking their children out of their respective institutions, and about 10.7 percent of those had children in out of state colleges.

At Elon in particular, Pat Murphy said students at Elon rarely leave for purely financial reasons. “That may be the official reason given, but it’s usually something more than that,” Murphy said.  However, if the economy remains in its current state, this could change.

“We’ll do what we can to get some kind of help in there,” Murphy said.

As he has been reviewing incoming freshmen’s files, Murphy has noticed that in “probably about every 10^th or 12^th file there’s something documented in their where a parent has had a large drop in income due to the economy, or they had a large amount of investment lost and that’s what they were counting on,” he said.

An Elon survey

Elon students Alex Baker, Scooter Brooks, Jeff Kriswell, Alex Litoff and Christi Wieand conducted a survey of six men and three women, examining graduating seniors and their prospects under the current economy.

They concluded that seniors’ post-graduation prospects are indeed suffering, with many potential employers turning them away after having previously laid off some of their workforce.

These students’ decisions for future jobs vary depending on individual interests, but everyone is scrambling to find a job.

According to the survey, some students are looking to change location and move out of Elon’s smaller community, but even the larger markets are losing jobs.  Students are considering living at home, while others are finding themselves forced into certain locations. Students are even basing their job search on cities which have been less impacted by the economy.

‘I don’t expect things to be very easy’

“I keep hearing from people that it’s harder to find a job right now especially out of college,” Anna Davis said.  As an alternative, she has been looking in to programs like AmeriCorps and Teach for America.  She sees these jobs as more stable options.

“I don’t have a lot of plans so I don’t really know what to expect or what will have to change,” Davis said.  “I don’t expect things to be very easy but also I’m not scared about financial stuff either.”

Because of the insecurity of the job market, Davis is trying to be flexible in her plans, leaving her options as open as possible.

“I’d say my number one fear going into my job search would be having to take whatever I can get,” Davis said. “I think that I’m ok with that at this point but I definitely want to have room to grow in my profession and hopefully I’ll have some options. I don’t exactly want to be waiting tables.”

The job market slump

According to an April 3, 2009 article in The Boston Globe, “the US economy lost another 663,000 jobs last month, raising the total this year to 2 million, and the unemployment rate jumped to 8.5 percent,” the highest it has been since 1983.

The economic problems have had an influence on the job market.  For college students, this can be a problem if companies cut entry level positions.  “People just have to work that much harder to get jobs,” Steve DeLoach said.  “People have to change their expectations; they’re going to be lucky to get a job.”

Besides traditional jobs, students also have the option of looking into service programs like the PeaceCorps and Teach for America.

“[The economy is] going to affect college students; not only are students not going to get entry level jobs, it’s probably going to affect internships,” DeLoach said.

Because of Elon’s emphasis on internships or summer job experiences, administrators at the Career Center have had to keep an eye on any and all available opportunities.

In particular, Pam Brumbaugh of the career center noticed that some previous partners at Elon’s career fair were not present this year, presumably because the positions that they normally offer to college students were cut.  “Employers who said they don’t have internships for this summer are cutting back,” Brumbaugh said.

Students are feeling pressured to do internships, but a December 1, 2008 article in The Philadelphia Inquirer, reported that “as the labor market tightens, industries laid low by the financial wreckage are nipping student workers from their weakened budgets”

At the same time, some companies that can’t afford to hire full-time employees may end up taking on more interns.

Courtesy of Fewings.

Hope in the face of uncertainty

Anna Davis doesn’t have a specific set of plans for the future, and is still somewhat anxious over what it holds.

“There’s definitely a lot of doubt just because I think for any college student going out on your own and being responsible for all of your financial obligations is new and different and I’m a little excited about those things just to be out and completely reliant on myself,” Davis said.“As far as a career goes I am unsure of what I really want to do and I don’t know where the job market will be when I start looking.

After college, Davis hopes to pay off the rest of her loans and be able to budget her money to either continue saving it, or put a little more into the investments she holds.

Projecting further into the future, Davis says she doesn’t think about money being an issue when she must live on her own and support a family.

“As far as I’ve understood family, it’s about sacrifice for the most part and you make ends meet for the ones you love no matter what,” Davis said.

“I feel like right now I’m really optimistic. I’m not exactly sure how soon things will turn around but I don’t doubt that they will,” Davis said.  “I’m convinced that if you’re willing to work hard enough you can get by.”

To see a larger version of the timeline please click here.

A timeline of the economic downfall. Image from dollardaze.org.