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Business hands pulling rope

To Ann Tran, the economic crisis feels like a dark cloud hovering over the already stressful experience of graduate school.

"There's definitely a buzz in the air and even some distress about what's going on," says Tran, a clinical psychology doctoral student at the California School of Professional Psychology at Alliant International University in San Francisco. "Grad school is not exactly a piece of cake, and this adds to our worries."

Tran's not the only one concerned about how the nation's economic meltdown will affect life as a graduate student and as a psychologist. Experts say that the recession could affect graduate students in many different ways—shrinking student loans, flattened federal funding for research and changing job prospects.

Despite the gloomy talk, there are some bright spots. Federally funded student loans are still available, and new career opportunities for psychologists are opening up.

Although no one knows for sure what the long-term impact will be, the experts say to:

  • Expect greater competition in graduate programs. The National Center for Education Statistics at the Department of Education points to increasing enrollments, particularly in postsecondary and graduate education, says Jessica Kohout, PhD, director of APA's Center for Workforce Studies.

That's already happening at CSPP, reports dean Morgan T. Sammons, PhD. "This year, we had more applications than at any time in the past," he says. And the number of inquiries the department has fielded so far this year is 22 percent higher than last year.

Sammons believes the uptick has to do with something beyond applicants' desire to ride out hard times in graduate programs. "More and more people understand that the doctoral degree is the practice degree in mental health," he says.

  • Rest assured that loans are still available. It's true that the number of lenders making student loans is dropping. (See "Shrinking student loans," November gradPSYCH.) According to Mark Kantrowitz, publisher of,168 lenders have now stopped making federal education loans, and 37 have stopped making private student loans.

That said, most graduate students can still get federal loans—especially Stafford loans. (International students don't qualify for federal loans.) Graduate students are also eligible for graduate student PLUS loans. This program allows students to borrow up to the full cost of their educations as long as they don't have bankruptcies, foreclosures or anything else that gives them an bad credit history. (A related program, the parent PLUS loan program, serves parents of undergraduates.) While the denial rate for the parent PLUS loan is up, says Kantrowitz, so is the approval rate for the graduate PLUS loan. "Graduate students tend not to own residences, so they're less likely to have foreclosures and therefore be denied PLUS loans," he says.

Getting a private student loan is increasingly difficult, says Kantrowitz. But anything the government does to ease the "liquidity crunch" will trickle down to student loans, he says. "What's needed is to get the money flowing again," he explains. "Mortgages, auto loans, credit cards and student loans will all have a positive reaction to increased liquidity overall."

Loan forgiveness programs may also be harder to come by than in the past, adds Kohout, noting the huge debts many students incur. According to APA's 2007 Doctorate Employment Survey, the median education-related debt for psychologists who received their doctorates in 2005 was $60,000.

  • Keep an eye on training opportunities. APA is continuing its efforts to increase federal funding for internships and postdocs, says Nina Levitt, EdD, associate executive director for the education government relations office at APA. "Discretionary funding has been significantly reduced or flat funded for the last 15 years, so there's not much give left," she explains. "I think it's going to be harder next year because of the current economic crisis."

Levitt is nonetheless hoping for an increase in funding for the Graduate Psychology Education program, the only federal program specifically focused on training psychologists. "If we can secure champions in the House and Senate, I'd say we have good prospects," she says.

Another priority? "Doing everything in our power" to ensure that reauthorization of the Substance Abuse and Mental Health Services Administration and the Bureau of Health Professions includes work force development, she says.

Another area of concern is internships. As local, state and federal budgets shrink, so could funding for mental health care—and internships at public institutions, says Greg Keilin, PhD, match and clearinghouse coordinator at the Association of Psychology Postdoctoral and Internship Centers.

But budget cuts aren't the only factor at work, says Keilin. The last few years have seen a jump in the number of internship slots available, he points out. And the new mental health parity law may lead to greater opportunities for psychologists. On the other hand, some graduate students may consider the cost of traveling to interviews, moving to a new location and taking a potentially low salary and decide they simply can't afford to go on internship this year.

"That's why I've stopped predicting," says Keilin. "There are just too many forces at play."

His advice? Stay focused on the internship application process. "The vast majority of students get sites and are really happy with their placement," he says.

  • Expect belt-tightening in the research arena. The economic crisis spells tough times for researchers, warns Karen Studwell, JD, senior legislative and federal affairs officer in APA's Science Directorate. "Unfortunately, everyone is being asked to make sacrifices," she says.

At the National Institutes of Health, for instance, the budget isn't keeping pace with the biomedical rate of inflation. "To maintain funding for a consistent number of grants, the institutes are having researchers cut back their own budgets," Studwell explains. "Investigators are having a harder time growing their labs or funding as many graduate students as perhaps they have in the past."

Would-be researchers shouldn't despair, however. There are still opportunities, especially in fields such as neuroscience and behavioral genetics and for researchers able to work in multidisciplinary teams. And, Studwell emphasizes, "the best ideas still get funding."

  • Be flexible about your job expectations. Unemployment for psychologists is low—just 3 percent for new doctorates, says Kohout. But the jobs that are available aren't the same as they used to be, she warns. For example, she says, "Private practitioners can't expect to simply hang out a shingle and start working." With the downturn, she explains, people who lack insurance coverage for psychological care may not be able to afford sessions anymore. That means basing your practice on clients who pay out of pocket will become much more difficult than it once was. "You're going to have to be much smarter about how you get the word out that you're there," says Kohout.

The academic work force is changing, too. Even before the economic crisis hit, schools were shifting from full-time, tenured faculties to a contingent work force—professors who work on a contract basis. The economic crisis may accelerate that trend as schools struggle to cope, says Kohout. At public institutions, a drop in tax revenues may result in hiring freezes and fewer open positions. "And private institutions that were invested in the stock market just watched their portfolios take a hit, so their resources have also diminished," says Kohout. That's true on an individual level, too: Many professors on the verge of retirement will now stay put because they can't afford to retire, she predicts.

However, there are still plenty of opportunities, emphasizes Kohout. The military and correctional systems both report unfilled positions for psychologists, for example. Other promising areas include working with America's rapidly aging population and treating veterans with post-traumatic stress disorder and traumatic brain injuries. For academics, says Kohout, overseas branches of U.S. universities represent one promising option. And there is increasing interest among employers in those who can work as part of interdisciplinary teams in research, academic and practice settings.

Above all, says Kohout, don't panic. "The economy has deteriorated before and we haven't seen huge increases in unemployment in psychology," she says. "Students may not find precisely what they want right away, but opportunities do exist."

By Rebecca A. Clay

Rebecca A. Clay is a writer in Washington, D.C.