College on a Dime: Public colleges boosted by economic woes

Many college-bound high school students have their eye on attending expensive private colleges, and with their beautiful campuses, air conditioned dorms and strong brand names, it's easy to understand why. But recent action in the stock market and credit markets threatens those plans. The portfolios that were going to pay for college are down more than 40% so far this year, and tightness in the credit markets is making loans harder to come by.

The USA Today reports that many families are responding by taking a harder look at public colleges. New York's most selective public institution, Binghamton University, has seen its applications rise by 50%.

If you're the parent of a high school junior or senior, and your last name isn't Gates of Buffett, you should absolutely be steering your child to a more affordable college. Here's why: If junior heads off to a state university and does well, he can always transfer to a first-tier college after sophomore year. The diploma will come from the university where he graduates. But if he heads off to a $40,000 per year college and you run out of money before his senior year -- and credit markets remain tight so you can't get more loans -- he could be forced to transfer to a less prestigious school, graduating with that diploma. The huge expenditures of the first few years will have been for nothing. With student loans drying up, many students are finding themselves in exactly this situation.

Also, with the job outlook looking bleak for future graduates, it's also a good time to be conservative about college financing. In a weak job market, a few hundred dollars per month in student loan payments can add to the stress of entering the labor market for the first time. Even if you can get tens of thousands in loans to attend a private college, it's still probably a bad idea.

AOL Money & Finance writer and editor Zac Bissonnette is a sophomore at the University of Massachusetts Amherst, and an expert on getting a great education without going broke. Got a college question? Leave a comment and he'll get back to you!

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