American Families Spent 16% More on College

The average American family spent $24,164 on college costs for the academic year 2014-2015, a 16% increase year over year, and the first significant increase in five years, according to a study.

Year over year, the amount that parents pay for college out of their savings and family income rose 17%, from $8,854 in 2014 to $10,365 in 2015. That is the largest proportion of parent contribution since 2010, according to a new survey by Sallie Mae and researchers at Ipsos.

Parents are paying 32% of total college costs, compared with 30% paid for by scholarships and grants. Student borrowing accounts for 16% of the total cost and parent borrowing accounts for 6%. Students contribute 11% of the cost from their own income and savings, and the remaining 5% comes from relatives and friends.

Sallie Mae and Ipsos noted that a “significant” increase of 25% in the amount paid by high-income families was largely responsible for the overall rise in out-of-pocket spending on college. Parents’ contributions from the savings were unchanged, but contributions from current income rose 40% compared with the 2013-2014 academic year.

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The study draws these conclusions from the data:

The rising cost of college undoubtedly influenced families’ increased spending on college. Additionally, though, families may have paid more for college this year, compared with the prior four years, because they felt economically ready to spend more.

The proportion of families who took actions to make college more affordable grew over the prior five years; however, this year, there was no growth in the number of families taking affordable actions, and in several areas, there was a decline. Specifically, fewer families chose a school close to home to reduce transportation costs, and fewer students were living at home while going to college.

Separately, compared with the prior five years, fewer families reported eliminating colleges from their potential selection set due to cost.

Finally, parents were less worried about economic factors most likely to affect their ability to pay for college. Most notably, fewer parents were extremely worried that earned income will decline due to job loss. Thirty-three percent of parents had been extremely worried about that in 2010. This worry dropped to 23 percent in 2014, and to 17 percent this year.

Borrowing to meet college expenses accounted for 22% of what families paid in 2014-2015. Some 38% of families borrowed to help pay the bills, but borrowing varied by the type of college a student attended. At private, four-year colleges, 56% of families borrowed money to pay for school expenses, compare with 43% of families with students attending a public, four-year school, and 22% at public, two-year colleges. Students borrowed in 83% of families and parents in 28%, and student borrowing accounted for nearly 75% of the dollars borrowed.

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The study also noted that the majority of families do consider costs when choosing a college, most took multiple affordability steps and the majority (about 75%) of students worked while enrolled in school. Nevertheless, parents seem less worried about economic issues and, overall, families spent more on college than they had been spending.

The Sallie Mae/Ipsos report is available here.