Colleges Face Crunch Time

As colleges and universities across the state scrutinize their budgets in light of the deepening economic crisis, higher education advocates are concerned about what levels of financial aid will be available for students in the future.

Plummeting endowment values and rising layoffs — unemployment is at a 16-year high — of parents of college students are setting the stage for a financial aid crisis.

At the University of Hartford, school officials are reviewing the school’s financial aid structure, said Arosha Jayawickrema, the university’s vice president for finance and administration. He declined to give details.

“It’s not yet public,” he said. “It’s a sensitive issue to students and their families. We’re always open to working with individual students to see if there’s something we can do to help.”

Recognizing that the current economic crisis is creating a significant financial hurdle to college students and their families, Gov. M. Jodi Rell unveiled last week a $17.5 million program aimed at providing low-interest loans to Connecticut college students.

Her initiative will be a joint partnership between the state and Connecticut’s credit unions, which have pledged to fund the program.

It will offer new and current students who live or go to school in Connecticut education loans with interest rates capped at 6 percent or 5.75 percent.

Credit unions will have to allocate at least $100,000 to participate in the loan program, which will run for one year. It may be extended based on student demand and willing lenders.

Hefty losses suffered by college endowments over the past year will place an even greater strain on the schools’ abilities to provide aid grants to students.

Even so, higher education observers expect that financial aid will generally be the last item to be cut from schools’ budgets as colleges look to save.

“Job No. 1 of private colleges will be to make sure they stay affordable,” said Tony Pals, spokesman for the National Association of Independent Colleges and Universities.

Kelly O’Brien, director of financial aid at Trinity College, said the school has noticed an increase in financial aid inquiries and is preparing for more in response to spring semester bills, which were mailed out late last week.

This past year, 45 percent of Trinity’s 2,579 students received some sort of financial aid. With its average tuition and room and board costs now at $48,624 a year, the school is developing a loan program for students who do not qualify for institutional aid, O’Brien said.

Details, such as interest rates, are still being developed.

Schools with robust endowments have more flexibility to subsidize students’ educations.

Tuition Hikes Likely

With an endowment of $22.5 billion at the end of the 2007 fiscal year, Yale University announced in January it would cut family contribution by more than 50 percent for families making less than $120,000 per year.

Families making less than $60,000 per year will make no contribution. The school increased its financial aid budget by $24 million, to more than $80 million annually to accommodate the change.

The economic crisis has already had a clear effect on how students view their college options.

Sixteen percent of surveyed students are putting off college searches because they do not believe they can afford it and 57 percent are considering a less prestigious college, according to a nationwide MeritAid.com survey.

As applications to state schools and community colleges rise nationwide, Pals said this could spell trouble for expensive private universities, which on average rely on tuition to provide 70 percent of their revenue.

“I think you’re generally going to see a slightly higher increase in tuition for the coming year than the past year simply because of the revenue crunch,” Pals said.

Closer To Home

For prospective students, they are tending to stay closer to home for multiple economic reasons, said Dan Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities.

While that means more applications to state colleges, it also means state colleges may see fewer out-of-state students.

This past year, 24 percent of University of Connecticut students came from another state.

The average cost for those students this year was $37,604, compared to $22,502 for in-state students.

State schools across the country are likely to see their budgets slashed, and some systems have already seen their enrollment levels cut.

“During the last two major recessions in the early ’90s and ’80s, states cut back on public higher education funding,” Pals said. “What you often saw then was tuition increases in the double digits.”