National economy affects colleges
By Manny Casillas
Editorial Assistant
America is up against a major economic crisis, the likes of which haven’t been seen in decades. The national economic crisis is being felt all over the world, including on college campuses.
In short, the crisis stems from the actions of major banks and lending companies that gave out loans that could not be paid back sufficiently. The debt rose considerably, and now many banks and lending institutions are left with large amounts of worthless debt, and confidence in Wall Street institutions has dropped dramatically.
In simpler terms, many borrowers who took out loans and mortgages did not go through all the necessary steps that a University of Indianapolis student would embark on in order to fill out a student loan. So, the situation is similar to a college student receiving bad loans.
The recent economic happenings have put Washington and Congress in a tailspin. For two weeks, Congress and lawmakers endured intense negotiations and debates in order to try and pass a bill that will mitigate the crisis. Treasury Secretary Henry Paulson proposed a $700 billion bailout plan, but many in Congress balked, leading to the long debates.
After a defeat in the House of Representatives on Monday, Sept. 29, the Senate voted to pass the bill later that Wednesday.
The current crisis has had indirect impact on college campuses through financial aid and student loans. Institutions such as Sallie Mae, the country’s largest student loan institution, have experienced negative consequences.
“Sallie Mae was hit this summer, and it caused Congress to legislate a reduction in the amount lenders get [as far as financial aid],” said Linda Handy of the UIndy financial aid office. “About 100 banks withdrew from the Stafford Loan program…so a bailout has already happened to lenders like Sallie Mae.”
According to some of those involved in UIndy finance, the campus has already taken steps so that it may come out of the current state of the economy in one piece. If any change has happened in financial aid, the changes have only been common, such as rising tuition and utilities costs.
It’s student livelihood that will really feel the hit, according to Matt Will, associate professor of finance and director of external relations for the business office.
“Inflation is at levels as high as they’ve been in the last twenty-five years…that’s a big deal, because you will see that in the cost of your books, the cost of your food, the cost of your energy,” Will said. “The whole problem in the country now basically started because it was tougher to get a house mortgage than it was to get a student loan.”
However, compared with other private institutions, and because of the stable Indiana economy, UIndy has managed to weather this financial storm.
“Most private universities have had tuition increases much higher than the University of Indianapolis, so the university has been very careful to try and control its expenses,” Will said.
Mike Braughton, vice president and business and finance treasurer said the university has taken steps to protect itself from national economic fallout.
“We’re very fortunate from a timing standpoint to have completed a tax exempt bond issue for financing,” Braughton said. “Basically we are granted the authority by the legislator to sell bonds out in the investment market place, and any earnings from those bonds to the investor are exempt from federal income taxes. So, that enables us to borrow at a much lower rate.”
Braughton’s example states that the university was fortunate to secure a tax-exempt bond last May, so arrangements to pay the contractors for the Schwitzer Student Center expansion and the new dorm.
“The university has higher costs because of inflation; we have to pay more for everything we buy…so that cost gets passed along,” Will said.
College students have already been experiencing their own version of this crisis when they end up in large debt because of credit cards. Therefore, caution has to play a major part in financial decisions, particularly for students about to graduate.
“If you’re graduating in the next twelve months you should be concerned about job prospects,” Will said.
As far as the affect on the university itself, neither Handy, Will nor Braughton see a major impact that will lead to negative ramifications, as enrollment for UIndy has continued to rise.
“I see no major impact on us, we take defensive steps to insure we’re not affected by crazy spikes in the economy,” Braughton said.
Braughton does, however urge students to be wary of financial decisions.
“Be cautious though,” Braughton said. “If it’s too good to be true, it probably is.”
