Since my last post, the volatile economic changes of the past few weeks present some serious implications regarding some areas for funding undergraduate and graduate education. As community members, we are not immune to the vicissitudes of the American economy. Students are beginning to appear at food banks in order to make ends meet and this certainly won't stop given the economic predictions for the near future. I have written about the different avenues for obtaining financial assistance including grants, scholarships and student loans. However, this drastic transformation of the economic landscape warrants further discussion about financial aid in the form of the availability of loans, their interest rates and tax implications.
Currently, the credit market is basically frozen which means that money is not moving between businesses and financial institutions so that they can continue to function by meeting their operating costs. Once this market starts to function again, it doesn't mean that student loan money will be readily available. Just like home mortgages, car loans and home equity loans, private student loans, which help many undergraduate and graduate students meet the costs of their education, are going to be subject to the ever more stringent requirements of financial institutions as well as the increasing rates to borrow this money. Some institutions have discontinued the student loan business because it's viewed as risky due to the history of student loan defaults. These financial establishments understand that the economy is tanking so they're erring on the side of caution. The future predictions of job loss or unavailability may fuel this prudence because these loan repayments may prove additionally difficult to be made on time. These decisions are predicated on the real possibility of more defaults.
Grants and scholarships present other concerns for students especially regarding their tax burden. These forms of financial aid are immensely helpful for the reason that they don't require repayment. Some scholarships or fellowships include a living stipend which is funding that is intended to assist with daily living expenses so that students can focus on their education. These forms of financial assistance have different tax statuses depending on whether or not they are deemed as "income" by the IRS. If they are considered income, students need to be prepared to pay taxes on this money. Others don't carry this responsibility so it is imperative that students check this information in order to understand this possible outlay. A tax professional may be helpful in explaining this area of tax law. In an economy that is rapidly changing, students need to be aware and plan for this expense.
We've all seen the dire predictions of the various government entities, print news and cable news outlets. Yet these forecasts don't bode well for graduate students who are struggling to fulfill their dreams. Currently, I'm reviewing my own yearly budget so that I can take into account this significant shift in the economy. The operating costs for my home are going to change but my income is not. Therefore, I need to reevaluate each line item and decide where it's possible to save money. I would urge any student to review their financial plans and make necessary adjustments to reduce the stress associated with paying for your education. Among graduate students, few will be immune to the tumultuous economic times.