Families turned to the same mix of resources to pay for college in 2009-10 as they had in previous years, but they used more money from each source as the overall cost increased, according to a report released Tuesday by Sallie Mae and Gallup Inc.
The report, “How America Pays for College,” is the student-lending giant’s third annual study, conducted by Gallup, of how families finance higher education. It is based on a survey of 801 undergraduates, ages 18 to 24, and 823 parents of such students conducted by phone from late March to early May.
The survey asked families for both a total dollar figure, representing all college costs before financial aid, and an itemized breakdown of how much money they had used from all sources—including grants, scholarships, and loans—to meet those costs.
Each year families have reported a larger figure for itemized costs than for their estimate of overall expenses, and Gallup favors this larger number. The combined spending from all sources reported by families for 2009-10 came to an average of $24,097, a 24-percent increase from the year before.
To meet the increased cost, families reported using larger amounts of grants and scholarships, parent income and savings, parent borrowing, student income and savings, student borrowing, and contributions from family and friends than did the previous year’s respondents.
The share of the overall cost covered by each source was similar to the previous year’s results. Thirty-seven percent of costs were met with parents’ current income and savings, 10 percent by parent borrowing, 23 percent by grants and scholarships, 14 percent by student borrowing, 9 percent by student income and savings, and 7 percent by money from friends and relatives.
Perception Drives Behavior
The value of the report, its authors say, is that it shows American families’ perceptions of college costs and how they meet them. “And it’s their perception that drives their behavior,” said Bill Diggins, a senior consultant at Gallup and lead researcher for the study.
On average, respondents reported that student borrowing increased 25 percent, from $2,721 to $3,396, while parent borrowing grew 27 percent, from $1,775 to $2,261. Over all, the survey found that slightly more than half of families pay for college without borrowing.
Unlike other reports, “How America Pay for College” looks only at traditional-age students, and it considers annual borrowing rather than the amount of debt students graduate with. Those differences explain why a relatively smaller share of families in this report said they had borrowed for college.
The report also described differences in college-financing patterns by family income and ethnicity. For example, while most families saw an increase in college costs, families with incomes below $35,000 have seen a relatively flat cost of attendance, possibly because students in those families are shifting to less-expensive two-year colleges.
And a larger share of Hispanic parents said they were “extremely worried” about economic issues, like tuition increases and job loss, compared with both black and white families.
The study also found that college costs are affecting families’ college choices. Sixty-three percent of respondents reported eliminating colleges from their lists for financial reasons, compared with 56 percent of families in 2008-9 and 58 percent in 2007-8.
While a similar share of families reported discarding choices for financial reasons early in the selection process, a larger share reported eliminating colleges once they had received financial-aid packages.
Despite the down economy, the study found no sign that more families were completing the Free Application for Federal Student Aid. As in previous years, about three in four families completed the form. Of those who did not file, 37 percent said they didn’t think they would qualify for aid, 34 percent said they did not need it, and 13 percent were unaware of the form.
