A recent study by Sallie Mae and market research company Ipsos titled, “How America Pays for College 2014”, released information on how families choose to pay for college.
In its seventh year, this year’s study surveyed 1,601 undergraduate students between the ages of 18-24 and found that families have a strong commitment to the college experience with 98% of those surveyed placing high enough value in attending to stretch themselves financially.
The study also discovered that in order to pay for college, families were willing to take anywhere from one to five steps, with almost 70% applying to in-state schools, 65% cutting back on vacations and more than 50% living with relatives instead of in the dorms or apartments. Cheaper meal plans and textbook rentals are also becoming popular choices to cut costs.
Two-year schooling is on the rise as well, with 34% using this method of learning; the highest amount in the entire time the study has been conducted, writes Karen Damato for The Wall Street Journal. Students begin their education at a community college, and finish in a four-year school to lessen the cost.
According to Michael J. McDonough, president of Raritan Valley Community College, “community colleges have become more aggressive in marketing (their) affordability.”
Students are also less likely to pay for school with loans. The average family paid 22% of college costs using borrowed money. This is down from the 27% paid in the previous two years. About 42% of the cost came from other revenue, such as income and savings.
A large increase in grants and scholarships made this situation possible for low-income students. Higher income students, those whose families make $100,000 or more per year, continue to rely on well-paying investment accounts.
Families were also more likely to take money from a state-sponsored 529 colleges-savings plan, with 15% using an average of $9,233 for college expenses.
The study also found that 7% of families are taking money from their 401k to help lessen the cost.
“It is so much harder to catch up [on retirement savings] once you’ve done that,” she said. Also, the withdrawals generally are taxable, and such income can hurt families in financial-aid calculations, she added.
One-fifth of families did not need to borrow any money or rely on any grants or scholarships to help pay for college, and 31% of students paid for college without family assistance.
The cost of college has stabilized over the past few years at an average cost of $20,882. The highest cost was seen in 2009-2010 at $24,097.
This year the study looked at three new sections: college planning, first generation students, and personality types. Researchers discovered that 3 in 10 were among first generation students.
“They are very resilient and clever and determined to make college work,” Sarah Ducich, a senior vice president at Sallie Mae and a co-author of the study, said. “We can have a lot of policy debates in Washington, but families are finding ways.”