New Report Details How America Pays For College

U.S. families are scrambling to pay for the ever-rising cost of their children's college educations, a new survey shows.

Families said their spending for education rose 24 percent, on average, to $24,907 during the 2009-10 school year.

The biggest chunk of money for college – 37 percent – came from parents' income and savings. Loans taken out by parents and students made up another 24 percent. Grants and scholarships contributed 23 percent of school fees, the survey said.

Parents paid for nearly half of students' college costs, whether through loans or from their savings and income. The survey showed that amid the weak economy, parents are making sacrifices to come up with the money for their children's education. Nearly a quarter said they have cut their general household spending, while about half said they have worked more hours or otherwise increased their earnings.

The report, commissioned by student loan provider Sallie Mae and conducted by pollster Gallup, surveyed about 1,600 people by telephone from March 24-May 3. About half the survey respondents were undergraduate students ages 18-24 and the other half were parents of students. The margin of error was plus or minus 3 percentage points.

Comments

[REDSTATEREFUGEE]

08:30 PM on 08/11/2010

One strategy is to attend a For Profit ( FP ) institution, where, if you meet federal and state qualification guidelines, a student can attend virtually free, and, in California, receive a cash stipend just for attending school......all of this paid for by the U.S. and Cali taxpayers, of course, at a tuition rate somewhere around ten times the cost of attending a local community college, which, because of funding reductions, offers limited class selections. FP administratiions are reaping a huge profit from those unfortunate enough to have to retreat to their institutions, but who do not realize that their degrees are worth far less than they would have imagined......

[BillGriffithJrCFP]

11:27 PM on 08/10/2010

With the average four-year cost of college approaching $120,000 for one child, many people are concerned about paying for college at the same time they are saving for retirement.

There are various college funding and other financial strategies available to reduce the cost of college. The strategies are very different for the financial aid candidate and the family with high income and assets. By implementing the appropriate strategies available based on their income and assets, parents could potentially pay thousands of dollars less for the college education of their child or children. Some options are better suited for the financial aid candidate and some are better for the family with higher income and assets. Choosing the wrong option can be disastrous and cost parents thousands of dollars more for college
or in lost retirement savings.

By planning ahead, parents can implement strategies for increasing financial aid eligibility, maximizing tax benefits and increasing cash flow. Then there are loan strategies to handle any shortfalls.

Unfortunately, many uninformed parents inefficiently pay for college expenses and as a result they end up spending thousands of dollars more for a college education. Worse yet, they needlessly take thousands of dollars out of their retirement savings to pay for out-of-pocket college costs.

[Palaver]

01:47 PM on 08/11/2010

There might be better strategies for paying for college, but they usually involve passing the cost along to other institutions. As a result, the less savvy might be forced to pick up the cost of those savings.

I worry that adding financial complexities would stifle access and create more barriers to social mobility. A former education secretary testified before Congress arguing that many of the increases in financial aid go to students who would already be in college. Meaning, there ought to be more aid and financial strategies for families and students where the cost of college is the single greatest barrier.

It's good to worry about retirement savings and out of pocket expenses, but if the child's education is truly an investment, there should be a return on those costs. It's the uneducated families that face the most uncertainty and risk.