Today, Sallie Mae and Gallup will release results from a national study that may provide a clearer picture of the sources families rely on to pay for college. "How America Pays For College" is based on in-depth statistical analysis of a nationwide survey of more than 1,400 parents and students.
Most parents and students share the responsibility to pay for college, but parents generally contribute more to a students’ education using their personal savings and income as well as various forms of financing.
Parents generally used current income and savings (32 percent of the total family contribution) as well as various forms of borrowing (16 percent) to cover college costs, according to the survey. Students tended to rely more heavily on borrowing (23 percent) as their primary way of paying for college. Students’ personal income and savings only accounted for about 10 percent of the total amount contributed for a college education, according to the survey. Grants and scholarships made up about 15 percent of the total amount paid.
Family contributions varied greatly across income levels, according to the survey. How families borrowed also differed greatly from family to family and there doesn't appear to be any easily defined standard applicable to every family. For example, while the survey found that most families do not rely heavily on home equity loans to pay for college, those that did, did so heavily, usually tapping more than $10,000 of their home’s equity to cover college costs.
Behind family income and savings, federal student loans were the most frequently used source of funding to pay for college. While parents generally borrowed less often than students, when they did, they borrowed greater amounts, according to the survey.
The study also found that most low income families are filling out the Free Application for Federal Student Aid (FAFSA). Nine out of 10 families with incomes below $35,000 submitted the FAFSA, according to the survey. But that number declines rapidly as incomes increase. Only 76 percent of middle income families - those with annual incomes between $35,000 and $50,000 - filled out the FAFSA. The numbers of families filling out the FAFSA continued to decrease as incomes increased.
Other findings from the report include:
- Lower income families reported spending $400 on average from tax saving vehicles like 529 plans, compared to an average of $690 for middle-income families.
- Many students (37 percent) and nearly half of all parents (46 percent) did not rule out a school solely based on tuition and other college costs.
- The majority of students and parents (70 percent) responded that future income had no bearing on their current student loan borrowing.
The full survey is available on the Sallie Mae Web site.
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By Justin Draeger
NASFAA Associate Director of Communications
Posted 08/20/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
