According to a new poll on paying for college from student loan giant Sallie Mae, college grants and college scholarships now account for 30% of college costs for the average family, as families continue to deal with rising tuition costs in the aftermath of the Great Recession. Overall college spending per student has also declined from $24,000 in 2010 to $21,000 last year, and students are depending less on their parents once they start college.
The parents’ contribution from a typical family (from savings and income) is the second largest portion of the total, at 27%. Parents’ out-of-pocket spending for college has declined by about one-third, from $8,752 in 2010 to $5,727 this year. In their report, “How America Saves for College 2013,” Sallie Mae reports that families cite other concerns that compete with saving for college, including creating an emergency fund and saving for retirement. Also, many parents either believe that their children will receive enough in financial aid, college scholarships, or college grants to pay for college without their help, or that parents’ saving for college will prevent children from receiving financial aid. While 61% of students receive some form of college scholarships or college grants, it’s not enough to cover college costs on average, and the report recommends that grants and scholarships be considered as part of, but by no means the only, way to pay for college costs.
The remainder of a typical family’s paying for college costs comes from student borrowing (18%), student savings (11%), parental borrowing (9%), and contributions from family and friends (5%).
Concerns over paying college costs are behind other changes over recent years in how families handle college selection and student attendance. In 2010, half of families eliminated colleges at some point in the selection due to college costs; this year it was 67%. The number of students living at home or with relatives and commuting to school to save on college costs increased to 57% this year. About a quarter (27%) of students are accelerating their coursework to save money by graduating sooner. Reducing spending (48% of parents, 60% of students) and working more (20% of parents, 47% of students) are other methods to save money to help defray college costs.
Although paying for college is a concern, 85% of parents strongly believe that college is a wise investment for their child’s future, a six-year high for this annual survey. Nearly all the parents (92%) believed that their children would complete their bachelor’s degree within 5 years, despite the fact that actual 6-year completion rates range between 60 and 75% depending on how selective the school is.
Only about 38% of families have a plan for saving for college that will cover all four years of college. Only about one quarter of those saving for college are using 529 plans, which allow families to save for college in a tax-sheltered plan, and about 17% took funds from from 529 plans last year to pay for college. About 40% encountered unexpected expenses in paying for college. Half of families are not saving for college at all, up from 40% in 2010.
The national study, conducted by Ipsos, was based on interviews with 1,602 undergraduate college students aged 18 to 24, and parents of undergraduates, about how they were paying for college in the academic year 2012-2013. Sallie Mae conducts annual surveys on how families are paying for college and how they are saving for college.