The summer is quickly passing by, which means a new school year is just around the corner. For those of you with children of college age, that also means bursar's offices are reopening nation-wide, ready to receive that first tuition installment. In that spirit, Sallie Mae released it's latest update on their annual "How Americans Pay for College" report. The report's findings are summarized in the article below.
Keys for me: Parental Income and Savings surpassed Grants and Scholarships as the #1 source of funds for the first time since 2010; moreover Student Income and Savings is becoming a larger piece of the funding pie.
By Mandi Woodruff
According to Sallie Mae’s annual report, “How Americans pay for college”, Americans say they spent 16% more on college expenses during the 2014-15 school year than the year before. Families shelled out an average of $24,164 to cover college costs during the 2014-15 school year, compared to $20,882 the year prior. It’s the first time in five years that families have increased college spending year over year, according to Sallie Mae.
At the same time, the average cost of college tuition and fees rose by just 2% for the 2014-15 school year, according to the College Board, which tracks college costs nationwide. Why the disparity? Sallie Mae’s numbers are likely to be different because its report, which surveyed 1,600 participants, asks about overall spending, including transportation and additional expenses beyond tuition, room and board.
This year, parental income and savings went toward covering one-third of college costs, surpassing scholarships and grants as the largest funding source for the first time since 2010.
Kids are chipping in, too. Nearly three-quarters of college students are working at least part-time to help cover their college costs, according to the report. Student income and savings contributed 11%, up 5% from the year prior.
Who’s really paying more?
While spending across all income levels went up last year, those families with high incomes drove the increase in out-of-pocket parent spending overall. High-income households — defined as those earning more than $100,000 a year — spent $33,260 on college expenses this year, $12,000 more than middle-income ($21,375) and low-income ($21,036) families. In high-income families surveyed, 45% of college expenses came from parents’ income and savings, which made college students from high-income families less likely to take on student debt (see chart above).
High-income families pay more out of pocket partly because they can afford to and also because they are less likely to qualify for need-based grants and scholarships.
For example, nearly 40% of college funding for low-income families (those who earn less than $35,000 a year) came from grants and scholarships, compared to 25% for high-income families and 30% for middle-income families.
On the downside, however, limited income and savings meant low-income families were less likely to have enough cash on hand to close funding gaps. As a result, they were more likely to rely on student loans than any other income group.