Families Taking Extreme Measures to Pay for College
NEW YORK (BankingMyWay) -- American families are still convinced that college is a good investment, but they’re just as convinced that paying for college calls for what amounts to extreme financial measures, according to a report from Sallie Mae.
Americans are cutting back on their basic household budgets to send their sons and daughters to a good school.
The study, completed in collaboration with the data analysis firm Ipsos, finds that 83% of Americans believe that college is an “investment in the future,” and that finding ways to pay for higher education is a huge priority.
Paying for college is increasingly proving to be a high mountain to climb for U.S. families with costs escalating far faster than the rate of inflation.
According to InflationData.com, the total cost of paying for four years at a public college or university will rise to $120,000 by 2015. The web site also notes that the total amount of outstanding student loan debt stands at $40 billion.
Furthermore, tuition costs have increased by a staggering 498% since 1986, as the overall inflation rate has only risen by 115%.
That has U.S families up against a wall in paying for college, yet it’s a fight they’re willing to engage in to increase their children’s chances of succeeding in life, Sallie Mae notes.
Some study highlights:
- 83% of college students and parents strongly agree that higher education is an investment in the future; 70% say college is needed now more than ever; 63% think it is the path to earning more money (69%). That’s supported by the facts. According to Forbes, college graduates earn about $55,000 annually, whereas high school graduates earn, on average, $23,000 per year.
- U.S. families seem to be splitting the college financial tab. Sallie Mae says that students paid 30% of the total cost of college, up from 24% in 2008, while parents covered 37% of the bill, down from 45% over the same time frame.
- Families are getting choosier, too. 69% of Americans say they are “eliminating” expensive schools. Meanwhile, college consumers are cutting costs to pay for the school they ultimately choose.
- Virtually all families exercised cost-savings measures, including living at home (51%), adding a roommate (55%), and reducing spending by parents (50%) and students (66%).
- Community colleges are growing in popularity -- mainly for financial reasons. “In 2012, families continued the shift toward lower-cost community college, with 29 percent enrolled, compared to 23 percent two years ago,” says Sallie Mae.
- Overall, families paid 5% less for college compared to one year ago.
- Public funding is the “go to” option for more U.S. families. Sallie Mae says that 35% of students turned to student loans to pay for college, 25% are borrowing federal loans only, 9% are using a mix of federal and private loans, and 1% are tapping private loans only.
- In addition, grants and scholarships are down from 2011, making it even tougher to pay for college.
- Families are also cutting back by taking credit cards away from their sons and daughters, and those students who do carry a credit card are keeping their balances under $755, on average.
Clearly, American families want that college education. But paying for it is proving to be a task that upends the entire household budget process.
“This is really a tale of the resilient American family who still see the extreme value of a college education and are finding new and creative ways to pay for it,” noted Clifford Young, managing director at Ipsos Public Affairs, in a release.
“New and creative” is one way to put it.
Increasingly, Americans are working overtime to pay for college, apparently, no matter how high the cost.
More on college finances:
Why going to a college fair can save you
Savings tips for new college grads
—For more ways to save, spend, invest and borrow, visit MainStreet.com.