The COVID Crisis has Caused a College Planning CrisisOctober 14th, 2020 by Jim Allen
This year has been one like no other. The COVID pandemic has turned our everyday lives upside down, caused the tragic loss of over 200,000 lives, cratered the economy and ruined people’s financial plans. While not having as significant an impact as losing your job or not being able to pay your bills, your college savings plan has also likely been disrupted by COVID.
The COVID pandemic is putting a strain on colleges, both public and private, which will likely cause tuition increases as well as lengthening the amount of time it may take to complete your college education. Here are some of the issues that college students will be facing in the upcoming years:
Increased demand for financial aid with a reduced supply available: Colleges already have a finite amount of financial aid available each year and it is given out on a “first come – first serve” basis. With so many people losing their jobs, the demand for financial aid is going to dramatically increase, while the supply will stay the same or even decrease. The process of applying for and receiving financial aid is going to become much more difficult going forward.
Financial strain on colleges will reduce financial aid available: As colleges lose revenue due to declining student counts or tuition cuts because of distance learning, the amount they have available for grants and scholarships is likely to decrease. This is going to put pressure on students to get or keep financial aid. There have already been instances where students have had their financial aid package reduced or eliminated. Because of the COVID crisis, your college goals may need to be re-evaluated.
Budget cuts may lead to increased time to graduate: Even before the pandemic hit this spring, it was difficult for students to graduate in the traditional four years due to impacted classes and reduced class availability. The financial strain on colleges (especially state colleges) the pandemic has caused is only going to make a difficult situation worse. With reduced class sizes and possible layoffs due to budget cuts, getting the classes you need will probably be even tougher for the next few years. Expecting a 5 year college education and the associated costs with that likely makes sense going forward.
With current and prospective students facing these headwinds, it is probably time to take a new look at your college funding plan. You may need to be even more aggressive and proactive about going after financial aid, you should plan on taking more time to complete your education, and you should expect increased costs. Now is the time to revisit your college planning and adjust it to the new realities facing us.
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Jim Allen, CFP, ChFC, CDFA is the Director of Financial Planning and a Principal at Anchor Bay Capital. In addition to his 30 years of financial planning experience and his professional credentials, he holds a Master’s Degree in Financial Planning and is a former instructor in the CFP program at the University of California Irvine. He is also the co-author of the book “The Tools & Techniques of Charitable Planning.” Jim can be reached at [email protected]