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The Mass Media

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Recession and Education—A hard bargain

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Student talks to financial aid office. Photo by Caitlin Feest (She/Her) / Mass Media Contributor. 

“My dear, terrified graduates—you are about to enter the most uncertain and thrilling period of your lives.” – Lin-Manuel Miranda[1]. 

Life after graduation is uncertain. During the years of studythough we are burdened with managing our assignments, hobbies, passions, friendships, relationships and so onthere is a sense of certainty that things will end, for better or for worse. What lingers longer are the memoriesand the financial debt. 

Many of us have taken out student loanor have a family member who has agreed to fund our education. The ideaobviously, is to repay them at some point. Even during years with good economic growth student debts were mounting[2]. As the New York Times reports, sourcing the U.S. Education Department, The typical undergraduate student with loans now finishes school with nearly $25,000 in debt” [3]. 

Given the downward economic trend, the cost of sourcing these funds will be more difficult. The state of the economy affects everyone and students are no exception. At present, there is a debate on whether there will be a recession or not[4]. Whatever the economic outcome is, students are already facing the heat of high inflation and fluctuating economic growth patterns. 

The first of the major burdens for students is the rise in tuition costs. For instance, due to the high inflation of 8.5 percent, UMass overseers agreed to a 2.5 percent tuition hike across all campuses from the 2022-23 academic year[5]The second burden is the increasing student loan interest rates, as federal banks hike interest rates higher and higher[6]. The third is the loss of funding for education, narrowing the scope of financial coverage that scholarships can offer[7].

The other aspects are the loss of income due to inflation[8] and the rise in accommodation costs, household essentials and all other items. Students about to graduate will face a grim employment situation where many industries are facing a loss of jobs[9]. These issues create a major burden on students, leading to mental health struggles[10]. 

Even though many of these economic problems are out of our control, students must still face the burden. As InsideHigherEd puts it, “as public funding declines, institutions increasingly rely on revenue from tuition and fees and the student share in higher education revenues continues to rise [11]. Many opt out of higher education as a result, as CNBC reports, Between the rising cost of college and ballooning student loan balances, nearly half […] of currently enrolled undergraduate students with federal or private loans have considered dropping out of school due to the financial burden...”[12] 

There are ways to prepare for this upcoming recession. Even though they are not foolproof, as students, we can still do our best. Financial literacy and planning come in handy at these times. We can, for example, create a monthly review of our financial condition by filling out four specific columns about our finances—assets, liabilities, expenses and income. 

As students, many of us are starting from zero in terms of ownership, so the assets column might be practically empty. The second column is liabilitiesa grueling one to handle since our loans have interest, leading to everbulging debts. We should keep note of our overall debt, including the cost of interestThis might help to inform us about which loans we can afford to accept, and which we can’tThe idea is to keep debt to a minimumasking friends and family to bear a part of your expensecan also be an alternative if that is indeed possible. 

We can also break down expenses and income into more detailed columns; for instance, categorizing necessary and avoidable expenses. Do we need those expensive smartwatches, branded clothing and the latest models of iPhones that we always wanted during a recession when we aren’t sure what comes nextThis is a personal and individual decisionbut I would weigh in on spending less. 

The final category is income. We can categorize it as income from family and self. It’s important to try and access all sources of income. Scholarships, assistantships and considering work options that do not affect our studies are the best possible means. When we do generate incomeits important to save after we cover our food and living expenses and try to prioritize repaying interest payments even if it’s in a smaller amount, as they lower the total cost of our loans. 

As Thomas Fuller stated, debt is the worst poverty[13]. Hence, it is important to expand our skill set and establish positive connections which would help our future career opportunities 

Many believe cost is the biggest barrier to higher education in the U.S.[14], and that a bad economysuch as one with high inflation and a possible looming recessioncan only make it worse. As it is, the best way to determine how you can get through college during this time is to create a budget plan with these three columns, and regularly update itEducation is a meaningful way to invest in our future, and we should be conscious of not making it more of a financial trap than it has to be. 

 

[2] Good economic growth refers to three year growth rate of less than two percent during 2017, 2018 and 2019 

Since 2017, federal student loans have increased an additional $190 billion, totaling $1.57 trillion in 2020. The onset of the COVID-19 pandemic has piled on additional layers of economic challenges on top of existing loan burdens. 

About the Contributor
Charan Reddy, Opinions Writer