Students planning to study abroad next semester will have more than a foreign language, unwelcoming residents and exotic cuisine to grapple with now that the U.S. dollar has slumped to record lows, tumbling to a value well below the EU’s euro and the British pound.
As of yesterday, $1 was worth 0.685 euros and .493 pounds. At the end of 2002, when the Euro had its most widespread release, $1 was worth 1.0441 euros and 1.0622 pounds, according to the Federal Reserve Board.
Though Europe is still the most popular destination for American students, hosting 58 percent of those abroad, that number is a 7 percent drop from a decade ago, according to an International Institute of Education Europe Open Doors study.
As part of Boston University’s International Programs, which bills itself as “the premier study abroad provider in the country” with 61 programs in 21 nations, students receive a stipend as part of their semester costs each month to help ease the transition, said Finance and Operations Director of BU International Programs Philippe Pavillard.
“The stipends are usually given in local currencies, so the fluctuations of the dollar will not affect [students studying abroad],” Pavillard said.
However, in Dresden, Germany, nearly 40 percent of each student’s monthly stipend is allocated for rent, said College of Arts and Sciences sophomore Bing Chen, who is studying in the city this semester.
“This year, we get 550 euros per month,” Chen said in an email. “It sounds like a lot of money, but that’s pretty equal to the standard of living over here. Dresden is considered inexpensive in comparison to other places in Western Europe, and prices here are still definitely more expensive than Boston.”
Chen said because the chunk of the stipend goes toward housing — about 200 euros — and cannot be used toward necessities like food and toiletries, it is not as helpful as it sounds.
Pavillard said students should have a financial plan in mind before setting out for the semester.
“This year may not be the year to tour all the capitals of Europe during the spring break, as it would be quite costly,” he said. “Students should be very realistic when it comes to spending abroad. They should put together a detailed budget for their expenses and stick to it.”
Even pennywise students said creating a budget did not prepare them for costs that cannot be avoided, though.
“Laundry is probably the largest regular expense,” said College of Fine Arts junior Jude Ziliak, who is studying in London. “I often spend 11 pounds [about $22] on one round.
“If you adapt your diet to U.K. trends, you can eat cheaply, and I go to lots of discounted and free concerts,” Ziliak added. “Laundry, you can’t get around.”
Though laundry is an inescapable task, the option of buying clothes abroad also severely lightens the wallet. A Calvin Klein jacket in an American Macy’s costs $150, while the same jacket at Harrods, London’s largest department store, costs a cool 279 pounds, roughly four times as much when converted to U.S. dollars.
Video game prices also soar across the Atlantic. On Amazon.com, Guitar Hero III: Legends of Rock for the Xbox system costs $60, while the same game costs 70 euros on Amazon.fr, France’s version of the popular online shop – more than twice the American price.
According to a 2007 report from the Bureau of Economic Analysis , American students spent $2.7 billion for education abroad when the euro was first circulated in 2002.
The number nearly doubled in 2006, when American students paid $4.4 billion.
Foreign companies have resisted increasing prices in the United States to maintain their market share, which results in European consumers paying more than American consumers for the same product, wrote columnist James Surowiecki in The New Yorker.
Accordingly, students abroad are not only paying more for products because of the drop in the U.S. dollar, but also because products in Europe are just more expensive.
“The U.S. dollar has been weakening relative to the euro and other currencies for some time,” said Rui Albuquerque assistant professor of finance and economics at the School of Management. “The reasons for the poor performance are associated with the perception that the U.S. economy is not as strong. At the same time, [the Federal Reserve] has been lowering the federal funds rate — an overnight reference rate — in an attempt to shift the perceptions of consumers and companies in the U.S. about the cost of capital and to boost the economy.”
Albuquerque said the federal funds rate drop has been “received negatively” by investors who look for high return rates and often turn to other currencies in other countries with higher interest rates, placing immense pressure on the U.S. dollar.
“If foreign investors fear for their investments and leave, an increased fall in the [U.S. dollar] is to be expected,” he said.
Despite suffering from financial woes, College of Engineering junior Lauren Ouellette said she cherishes her study abroad experience in Germany last spring.
“The experience was definitely worthwhile,” she said. “Even though I came back in debt, I still wouldn’t change a thing about my time in Europe.”