No one is alone in the struggle with figuring out how to cover college costs. Every year, Sallie Mae puts out a survey on How America Pays for College with information on how families saved and paid for school, along with some of the reasoning behind college choices.
Survey results are summarized below, so you can see how your ideas for paying for college measure up to what families are actually doing.
Here’s what you need to know:
Families are budgeting for all four years of college.
One of the most positive answers from the survey was that more than 4 in 10 families have planned for all four years of college costs. The four year versus one year approach is important for families whose students may get a higher financial aid offer in the first year than the following three years.
For instance, let’s say a school costs an average of $35,000 per year. The student is offered a 4-year scholarship for $5,000 per year. However, they also are offered a one-year scholarship for $10,000 that is not renewable. If a family had only planned expenses based on the first year, they may not be able to afford future years.
Planning to pay for college includes borrowing for most families.
The average family surveyed spent $26,226 on college for the 2018 / 2019 academic year. About $11,300 (43%) came from family savings and income. About $8,100 came from scholarships and grants. About $6,300 came from student loans. The remaining balance came from family and friends.
These families would not have to borrow much more than $25,000 over the course of four years. About 6 in 10 families who borrowed student loans always had this paying for college method in their plans.
Almost a third of families don’t file the FAFSA.
While the FAFSA, the free federal form to request financial aid, was filled out by 77 percent of families that divided up $150 billion dollars in funds, 23 percent of families didn’t make this financial aid request.
Why are the rest of the families skipping such an important form?
3 in 10 nonfilers didn’t know about the form or missed the deadline. Another 3 in 10 were missing information or thought the process was too complicated.
Even more interesting were the 4 in 10 who didn’t think they would qualify for financial aid. Often, these families were wrong. Schools have vastly different income standards for who qualifies for financial aid. And everyone qualifies for student loans.
Extra FAFSA Myth: While it’s commonly believed FAFSA is the fast track to student loans about half of filers didn’t borrow any student loans at all. They were likely filing to try for grants and scholarships.
Students consider cost of college more than their parents.
Parents and students are considering both the value of education and whether a college is too pricey. Students are 25 percent more likely than parents to reject a college because of cost.
The majority of parents do think college is a good value and want to make financial decisions with their kids. Only 1 in 5 students are making decisions on paying for college alone.
Planners are expecting their students to stay in college long term.
Almost half of families who planned a paying for college strategy expect their children to go to grad school. Planners did much more than just save for the future. They also research costs and financial aid. They also included AP coursework in their strategy. Budgeting and limiting school choices was also evaluated.
5 Takeaways
- 40 percent of families consider the four year cost of college and plan for it.
- College funding includes student loans, family income and savings, borrowing, and grants and scholarships.
- Grants and scholarships are covering almost a third of college costs.
- Filling out the FAFSA is the most important step for getting money to pay for college, yet over 20 percent of families don’t fill out the form.
- Planning paying for college is often about a lot more than cash. Families are researching school costs and encouraging their students to take AP tests.
