The recent turmoil in the financial industry has an impact on the financing of a college education. As credit gets tighter, fewer private lenders offer educational loans and the requirements to qualify for such loans become more stringent. At the same time financial pressure on colleges could produce higher tuition increases and less scholarship aid. Does this mean it is a bad time to try

While the era of carefree borrowing seems to be coming to a close, borrowing to pay for a college education which will lead to a more financially successful future is still a reasonable investment. As you will know if you read Winning the College Game or the article Financial Aid 101, I'm not an advocate of borrowing more than you need to get through college successfully. The current credit crunch will make it harder for college students to borrow excessively to fund a deluxe lifestyle while earning a degree, which is probably a good thing. However, college loans have not dried up. Instead, the market is now more dominated by direct federal student loan lending, and that direct federal lending comes with some restrictions like reasonableness tests around the relationship between borrowing, actual educational expenses and total debt load.

Beyond the question of access to loans, will the financial crisis have an impact on your college education? It is too soon to know how this will all shake out, but certainly a general contraction of the economy and widespread investment losses have an impact on higher education. For public colleges the impact will be tightening state budgets causing restrictions in the amount the states can provide to subsidize their college and university systems.  That could mean faster tuition increases, or efforts to reduce costs which typically involve larger class sizes, more courses taught by lower paid adjunct faculty and possibly cancelling of particularly high cost degree programs.

For private institutions with sizable endowments the budget may get tight because the amount they can spend off their investments each year has declined. Tight economic times also tend to reduce annual giving to private institutions, further reducing their operating revenue. This reduction in resources requires some combination of reducing expenses and raising net tuition to close the gap. As with public institutions, the variable cost that is easiest to reduce in faculty salaries, so they could respond by offering larger classes or making more use of adjunct faculty.

Unlike most public institutions, however, private colleges tend to have large budgets for institutional grant aid, which is another expense they could reduce. In other words, a college facing declining revenues may offer fewer scholarships and need grants and look for more students who can pay full tuition. If you are already in college it is unlikely that your financial aid package will be revised to eliminate scholarships.  However, if you are just applying to college and know that cost is an issue in your being able to attend, you should probably be thinking about applying to several colleges where you are likely to receive scholarship offers. You can determine the historical odds that you will receive a grant offer by looking at the historical level of institutional grant aid a college offers, and seeing where your test scores and high school class rank fall compared to their most recently enrolled freshman class. Expect a few colleges, however, to suddenly pull back from that historical funding level. Since there isn't any way to know in advance which will be looking for fewer scholarship students and more net tuition revenue, you might want to apply to a couple more colleges than you would have in the to increase the odds of receiving at least one generous financial aid offer.

Taking the longer view, going to college during an economic downturn may work to your advantage. If funding college is suddenly more challenging for you, the same is true for millions of other students as well. This could result in a decline in college enrollment, and if you are one of the decrease number of student to push ahead with your education despite challenges, there will be less competition between college graduates when you finish your degree. When you walk across that graduation stage who knows what economic future you will be entering. It is a safe bet, though, that the future will be brighter if you've invested in becoming a more capable person capable of managing bigger challenges. So do what it takes to manage the challenge of getting through college in tough times. That's a college game you can still win.