How America Pays for College
This year’s How America Pays for College report, marking the 10-year anniversary of the study, takes a deep dive into differences in payingfor-college attitudes and behaviors over the past decade.
Notably, the balance of contributions from source categories has shifted. While some up-and-down movement is expected annually in the proportion of contributions from various resources, scholarship and grant contributions have grown into the leading position.
The proportion of costs covered by scholarships and grants shifted up or down frequently in the early years of this study but, since 2011-12, this source has increased each year but one, and the average amounts contributed have increased steadily since that same year, regardless of total average spending.
Parent income and savings contributions have been uneven. This is particularly notable because the level of contribution from parent income and savings appears to be a lever in determining total college spending and student borrowing.
The years when parent income and savings contributions were at their highest correlate to the years when average spending on college was at its highest; the years when parent income and savings were at their lowest correlate to the years when student borrowing was its highest. Use of 529 college savings plans seems to have plateaued.
In the first year of this study, 529 plans, instituted in 1996, were still relatively new. That year 6 percent of families reported using funds from a 529 plan to pay for college. The usage rate increased over time as more families signed up for these plans. The growth, however, has stagnated. The peak usage rate, 17 percent, was in 2012-13. Parents of this year’s freshmen have had the opportunity to enroll in a 529 plan since their child was born, yet only 13 percent of families reported using funds from a 529 plan to pay for college this year.
This absence of growth in dedicated college savings corresponds with a similar lack of growth in planning ahead to pay for college. We started tracking whether families had created a plan to pay for all years of college in 2010, and those who agree they have a plan has hovered around 4 in 10 families.
Not only has there been no increase in the proportion of families who have a plan, but those who agree today are less certain than those eight years ago. More families somewhat agree and fewer strongly agree they have a plan, compared to 2010.
Lack of planning also spills over to student loans. In 2008, we asked students to estimate their future monthly student loan payments. Some were close to what might be expected based on their loan amounts, but many were off base, both over- and underestimating the amounts.
Students this year responded in a similar way. While some were on target, many estimates were exceedingly high or low compared to calculations based on their loan amounts, indicating a lack of planning for future outcomes. Over time, families seem to have grown more sensitive to cost. In 2008, 58 percent of families eliminated colleges due to cost at some point during the college selection process.This year, 69 percent reported doing so.
In addition, fewer families believe the cost of a college is an indicator of the quality of education. Further, more families are seeking financial aid. Filing rates for the Free Application for Federal Aid (FAFSA) have increased gradually over time to 86 percent this year, from 74 percent in 2008. The primary reason for attending college—the reason parents and students have most agreed with for 10 years—has been “College is an investment in the student’s future.” For 10 years, it has compelled nearly 100 percent of families to attend college.
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