BLOOMINGTON, Ind. — Late Thursday evening, Neal Theobald, Indiana University's vice chancellor for budget administration, received a sobering letter from Sallie Mae, the nation's leading provider of student loans.
"Because of the continuing turmoil and uncertainty in the credit markets, Sallie Mae has made the difficult decision to tighten the underwriting on all our private student loan products, which will require applicants to meet higher credit standards. We believe that this action will mean lower approval rates for these loans," Sallie Mae Executive Vice President Barry Feierstein wrote.
The lending giant also announced plans to "adjust" or raise its loan pricing.
"These decisions were not easy to make," Feierstein said in the letter, "but the current financial markets provide no other choice."
At a time when student financial-aid requests nationwide are up 16 percent from last year, Sallie Mae's decision to make fewer loans at a higher price will deepen the financial pain of millions of parents and students who already are struggling to pay for college educations.
It's the latest example of how the Wall Street crisis is digging into the pockets of Americans who are far removed from New York's financial district.
Bloomington is another stop in a journey into America to chronicle these effects on folks of all backgrounds. Journalists from McClatchy and the American News Project, an independent video-news outlet, have reported on the wealthy in Connecticut, growing legal wars in New York City, family health and financial insecurity in Pennsylvania, job losses in Ohio and now higher-education anxiety in Indiana.
The project, "Fallout on Main Street," is available in print, on video and on the Internet.
Historically, when the economy starts to tank, students return to higher education in greater numbers.
"But with the credit crunch and money tight and the economy so bad, I think it's going to be difficult for students and families to pay that college tuition," said Roger J. Thompson, IU's vice provost for enrollment management. "I talk to parents fairly regularly, and they're struggling. Their kids are down to the last semester or two, money's tight and they're worried about their jobs, and they're just hoping they can get their kids the rest of the way through."
Amanda Daugherty was just a toddler when her father died, and she was still in high school when ovarian cancer took her mother's life.
Now only two months shy of her master's degree in public health, the 24-year-old Lafayette, Ind., native owes nearly $70,000 after financing almost all of her six-year college education with student loans.
The enormity of her debt first hit Daugherty last year after she received, for the first time, a bank statement that tallied all her loans, which then totaled nearly $60,000. "I kinda freaked out," she recalled. "I saw it, and my stomach just turned. It almost didn't seem real. Fifty or sixty thousand dollars? I'm like, 'Really? I racked up that much?' . . . It's so overwhelming. It feels like I'll never be able to pay it off. How am I ever going to be able to buy a house?"
Her more immediate concern is finding a position in the ultra-tight job market. Daugherty's already applied for more than 15 without success. She wants to work for a nonprofit agency, but she fears that the troubled economy may be conspiring against her.
"I think there's going to be cutbacks in funding and I feel like people won't be as willing to hire new people into organizations," she said. "I'm getting really scared because I don't know what to do if I can't pay. I mean if I don't have a job, can I claim financial hardship? I really don't know."
After graduation, Daugherty will continue working part time in the university communications department and waiting on tables at Mother Bear's pizzeria, where the entire night shift on Friday seemed to tell similar tales of financial stress aggravated by the weak economy.
Claire Miller, a freshman who buses tables at the restaurant, said that her mother, a paramedic, had taken a second job to help pay the tuition for her four children, who were all in college at the same time.
"All of us have jobs while we're in college because it helps (our parents) out tremendously. I might have to take on more shifts to help them because the economy now is just going down and everyone is feeling the effects of it." Miller said.
Antane Armstrong, a waitress, left IU last year because of money problems. She's trying to save enough to re-enroll, but with tips and business declining, her goal has become harder to reach.
Armstrong typically gets the standard 15 to 17 percent tip, with a few who always leave 10 percent. "Now the 10 percenters are tipping 5 percent, and everybody else has gone down to 10," Armstrong said.
Hostess Laura Cole, a 19-year-old sophomore, had a trust fund that was supposed to help her with college, but because it's invested in the stock market, it's been losing value.
"I'm under 21, so I can't touch my mutual fund, so I just sit back and watch it fail," Cole said. Her brother's fund dropped to $20,000 from $40,000 in a matter of months, she said.
Even future college students and their families are taking note of the costs.
On Saturday, about 20 Bloomington-area 4-H Club members met at the county fairgrounds to hear about their college financial-aid options from Roy Durnal, a senior associate director for recruitment at Indiana University.
Listening intently were Sylvia Reece of Bloomington and her 18-year-old son, Mykel Faultless.
Reece stopped working several years ago to care for her ill father and grandmother. She'll use her personal savings and help from her first husband, Faultless' father, to finance their son's freshman and sophomore years.
To save money, Faultless will have to attend a local community college for two years before transferring to IU as a junior.
"It's a little bit cheaper, and the credits will transfer," Reece explained.
Faultless also will have to contribute. He works at a car wash and local movie theater to make ends meet. He also has saved some money from livestock sales through the 4-H Club. Last year, he sold a chicken for $300 and his 310-pound pig fetched $2,000.
The budding business major still will need some student loans, however, and Durnal had a sobering warning for all the youngsters.
"I certainly hate it when I see students that are ready to graduate and facing what would ultimately be like a house payment just paying off their student loans. My first lesson for you guys is to be aware and don't get yourself too overburdened with that loan debt," Durnal said.
"I'm still new to all this college stuff and I don't really know what's going on, but when he said that, it worried me," said Faultless, a husky lad with an emotionless face.
To help with the costs, Reece said, she plans to go back to work when her son transfers to IU, and even though he'll continue to live on their 8-acre farm with the horses, goats, pigs and chickens, the tuition still will cost about $10,000 a year.
"I really hate to see him have to get all the loans and everything, but the jobs just aren't there, so it's scary," Reece said. "It's downright scary."