So the reality of the economic situation, like the identity of the final five cylons, has finally been fully revealed. TA lines are being cut all across campus, there is little (if any) departmental funding after for students after their fourth year, and the psychology department has been asked to cut its non-salary budgets a number greater than humanly possible.
What does this mean for the graduate students? Well, it places significant pressure on my class to finish as soon as possible. Many labs in the department (including my own) have students well past their fourth year and while grant money can still be used to support such students, its unlikely many labs will be able to make up the difference without departmental support. In the past, fifth and sixth year students have been able to secure TA positions, but the outlook for the current fourth year class is not so good. International students (who require funding or else face the possibility of having their visas revoked) will now be competing for scarce TA positions and advanced domestic students may not receive any departmental funding.
In the past when this has happened, professors have worked together to support students using grant money and other sources. There has already been talk of professors using their grant money to support students outside of their own labs as well as multiple labs splitting the cost of supporting a single student.
However, there is potentially some light at the end of the tunnel. The stimulus package working its way through congress includes billions of dollars for education. While this wouldn't solve the problem overnight, it would comfort some anxious minds.
In terms of myself, I am left relatively unaffected so far. I still have 3.5 years of guaranteed funding and it is very likely that I will be able to receive grant funding after that if need be. Still, the pressure is on to finish as quickly as possible. Frankly, I only allowed myself to get discouraged about this for a few hours. Things will probably get better and if they don't... well I'm trying to graduate in four years anyway. If anything, this just strengthens my resolve and gives me an additional reason to apply for outside funding. No graduate student from the psychology department has ever been able to secure an NSF graduate fellowship... I aim (seriously) to be the first.