According to a new national study being released today by financial services firm Sallie Mae and research company Ipsos, more families are using grants and scholarships to fund college costs than any other source of funding.
The findings also reveal that parents have reduced the share they contribute to their children’s education costs.
The 58-page report, “How America Pays for College 2013,” shows that as the economic downturn drags on, more student aid is being sought to offset the lower percentage of dollars parents are able to allocate.
Patricia Christel, a Sallie Mae spokeswoman, said the annual study is unique because of when it was first undertaken — 2008 — and the economic environment during the years since.
“When we started this, we had no idea we’d be tracking this during a recession,” Christel said. “We’re seeing families adjusting to a post-recession economy.”
Key findings detailed within the document include:
• Scholarships and grants are used to pay for 30 percent of college costs, up from 25 percent just four years ago. The average amount of such aid grew to $6,355, up from $4,859 in 2009.
• Parents now fund from income and savings 27 percent of college expenses, down from 2010’s peak funding of 37 percent. • Parents’ average out-of-pocket spending declined to $5,727 from $8,752 in 2010.
• Four in 10 families borrow to pay for college, including 29 percent who use a federal student loan from the government and 9 percent who use a credit-based private education loan from a bank to supplement funding needs.
Savings plans up
While parents’ incomes and investments are shrinking as sources of funds to pay for college, reliance on 529 college savings plans appears to be shifting upward.
In 2013, contributions from 529 college savings plans covered 7 percent of the total costs of college. This is an increase from 2012 when 529 college savings covered 4 percent of costs, and is equal to the percentage of costs covered from these plans in 2010, the year parent personal contributions peaked.
Perhaps it’s a sign of the economy, or something else, but the study showed advance planning for college remains low.
Six out of 10 families said they do not have a financial plan to pay for all years of college prior to the student enrolling and lack a financial contingency plan should an emergency arise. Two in five families, or 40 percent, report encountering major expenses that they did not expect in paying for college.
But even with all the financial issues at play, in 2013, 85 percent of parents strongly agreed that college was an investment in their child’s future, the highest feedback in the last five years of the survey.
It also showed a 15 percent decrease in parents’ worries and anxieties about factors such as tuition increases, possible job loss, reduced home values, access to grants and student loans, or increases in student loan rates.
Sallie Mae has a local office in Hanover Township that employs 800.