Families Stretch Budgets to Cover Rising College Costs
With the effects of the recession lingering, belts have been tightened, retail spending is down - but college spending continues to go up. In spite of a recent survey by Countrywide Financial suggesting that American's have begun to doubt the returns on the 'college investment,' an even newer poll by Sallie Mae suggests that they are still pouring money into higher education.
Sallie Mae just released the results from their third annual study of 'How America Pays for College.' The report is based on a phone survey conducted by Gallup in the spring of 2010. Pollsters asked 801 undergraduates aged 18-24 and 823 of their parents how much they spent on college costs before financial aid in the 2009-2010 school year. The survey also asked respondents to itemize how much they spent from each source, including grants, scholarships, loans and personal savings.
Although families used roughly the same combination of resources they had in 2008-2009, overall spending increased by 17% over the last year, and 28% above two years ago. The only families whose spending remained relatively flat this year were those earning under $35,000 per year. The report suggests that this may reflect a growing trend among students from low-income families to attend public 2-year colleges, which are associated with significantly lower tuition and costs. With the upcoming influx of federal money into the low-income Pell Grant program, low-income families will hopefully continue to be able to attend college in spite of rising costs.
Other families found multiple ways to make up for the increased costs. Seventy-three percent reduced other spending habits, and 48% increased their work hours or earnings. For students, the moving-home trend saved them a bundle on rent - a whopping 43% of families reported that their student lived at home.
Many families also reduced costs by choosing a less expensive school. Although most parents would love to send their children to their dream school no matter the cost, that simply isn't the reality in today's difficult economic climate. Sixty-three percent of families reported eliminating schools at some point during the college selection process due to financial considerations; forty percent cut schools after receiving their financial aid packages. Those figures are up from 56% and 36%, respectively, last year.
Parents Still Covering Most Costs
Average percentage of total cost of attendance from each source from How America Pays for College 2010, figure 1, page 9.
Many of the above measures were taken in response to growing concerns over the economic impact of college spending. Nearly half of families reported being 'extremely worried' that schools will increase tuition, as compared to less than one-third two years ago. And over a quarter expressed fears that their students would be unable to find a job, up from 10% two years ago.
In spite of recent surveys suggesting that today's students expect to shoulder most of the burden of paying for college, parents in the Salle Mae poll still reported covering the majority of expenses. Parents paid almost half of the 2009-2010 college costs with a combination of income, savings and borrowing. Student contributions from the same sources amounted to roughly one-quarter of expenditures, with the rest made up by grants, scholarships and contributions from friends and extended family. College savings plans have also grown in popularity, with 15% of families using them in 2009-2010, up from 11% last year and 9% two years ago.
So, as the Countrywide survey might suggest, did people resent this extra spending? In spite of fears that costs will keep going up, Sallie Mae's study says no - 82% of their respondents strongly agreed that 'college is an investment in the future,' and 71% strongly agreed that a college degree is more important now than ever before.
In fact, survey participants seemed perfectly willing to take on financial hardship for the sake of their education. Sixty percent strongly agreed that they would stretch themselves financially to afford college and the same proportion strongly agreed that they would rather borrow money than not go. The number of people who feel like the cost of college is commensurate with the value is a little lower, but still a majority at fifty-two percent.
This does not, however, mean that students aren't looking for a practical value from their education. Only about a third of students and parents strongly agreed that they themselves or their children would attend college for the social and intellectual experience regardless of whether a college degree leads to a higher earning potential.
Whatever their motives, it's heartening to see that people are still committed to investing in their education. With Obama's recent remarks to students at the University of Texas getting everyone's attention back to his college completion goals, hopefully state governments will follow suit.