Parents and students paid more than half of the costs of an undergraduate education out-of-pocket in 2017-18—a 42 percent increase from the year before, according to a new report.
In its 2018 “How America Pays for College” report, based on a survey of more than 1,500 parents and students conducted by Ipsos, Sallie Mae found that in 2017-18, families spent an average of $26,458 on college, an 11 percent jump from 2016-17 in which they paid an average of $23,757. There was no change in costs between 2015-16 and 2016-17, according to a former report.
The report found that in 2017-18, income and savings from parents and students paid for almost half (47 percent) of college costs—with 34 percent coming from parents and the remaining 13 percent from students. The year before, that figure was closer to 33 percent. Of those funds, parents paid for college in 2017-18 mostly using their income, with only only two-fifths of funds coming from savings. As a consequence, according to the report, “families who haven't saved and who have limited income at the time college comes around may be at a disadvantage.”
Scholarships were the most-used resource for financing an undergraduate education in 2017-18, used by 57 percent of families, and averaging $7,760 per student, according to the report. Scholarships awarded by colleges averaged $6,255, by state and local governments $1,155, and by communities or nonprofit organizations $1,116. While scholarships and grants covered 28 percent of costs in 2017-18, this figure was 35 percent the year before.
“The data suggest that scholarships—the vast majority of which are issued by the colleges themselves—are one of the most valuable means of helping families pay for college; last year, these funds paid for almost a fifth of the total cost of college,” Julia Clark, senior vice president of Ipsos, said in a press release. “Still, about a third of families do not even apply for scholarships, showing that there is still significant opportunity for families to continue to defray the cost of college.”
The report also found that student and parent borrowing increased between 2016-17 and 2017-18. In 2017-18 more than half of families borrowed to pay for college (53 percent), compared to 42 percent the year before. However, the report also noted that in 2016-17, 27 percent of costs were covered by borrowing, yet one year later that figure decreased to 24 percent.
In addition, the survey discovered that in 2017-18, only one-third of families took advantage of the ability to file the FAFSA early in October; the remaining filed in January 2018 or later. Among those families that did not file the FAFSA at all the most cited reason was that they didn’t believe they would qualify (48 percent), followed by not knowing of its existence (15 percent).
“It’s gratifying that families are so confident in the financial decisions they make regarding paying for college,” Sallie Mae CEO Raymond J. Quinlan said in a press release. “Still, there is more work to do to equip families with the tools and information that will help them manage education expenses, whether it be applying for financial aid earlier in the process or taking steps to minimize student loan financing costs. We are actively exploring innovative ways to help families do just that.”
Publication Date: 10/22/2018