University of Miami sophomore Sarah Zemach panicked when the Dow Jones Industrials Index fell 778 points on Sept. 29, the largest single-day point loss in history.
“I was sitting in my dorm when I got a phone call from Charles Schwab saying that I owe them $13,000,” Zemach said.
She immediately called home and learned the $30,000 investment that paid for her education was lost.
“That was my money, and now I won’t have it for after college,” Zemach said.
The stock market is one of the main sources of income for Zemach’s family.
“My dad had invested tons of money into the stock market and has lost a lot recently,” Zemach said. “There’s a possibility I may take next semester off or go to a community college, but hopefully everything will work out.”
Like Zemach, junior Matt Eisenberg is also concerned with the current economic situation.
“I don’t even want to see how much money I’ve lost,” said Eisenberg, who has personal investments in the stock market.
State-sponsored 529 college savings plans are vulnerable to the declines in the stock market. Parents are attracted to the plans because the earnings are tax-free, but accounts can quickly decline as the value of stocks decrease. Money is contributed to a fund divided among stocks, bonds and other investments. Conservative options for the plan invest more heavily in bonds and money market funds, and riskier options rely on stocks.
Current UM students using 529 accounts to finance their education will not have time for the stock market to recover before they need to extract funds.
“I feel sorry for anyone who had money they needed over the next couple of years in the stock market to pay for school,” said Robert Weiss, a parent of three college students, two of whom attend the University of Miami.
“Any money you need in the next four or five years may not be there,” Weiss said. “The losses have certainly affected everybody.”
Margot Winick, assistant vice president of Media and Community Relations, said current enrollment at UM has remained steady.
“It is too early to tell the full impact of the recent turmoil in the market on UM,” Winick said.
Some students are taking advantage of the economic turmoil and market volatility and following the advice of investor Warren Buffett, who is currently buying American stocks.
“A simple rule dictates my buying,” he wrote on an op-ed New York Times column on Oct. 16. “Be fearful when others are greedy, and be greedy when others are fearful.”
Sophomore Mike DeMasco invested about $3,000 into Wachovia and American International Group stock in mid-September.
He purchased shares while the prices were low. When Wachovia started getting offers from Citigroup to purchase the bank in late September, DeMasco sold his shares for a $2,000 profit.
“The stock market can only go up at this point,” DeMasco said. “Right now is the time to invest.”