When it comes to financing college, students are increasingly relying on grants and scholarships over monetary support from mom and dad.
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New data from Sallie Mae shows college spending per student is around $21,000 in 2012, down from $24,000 in 2010.
The “How American Pays for College” study found parents are now covering 27% of college costs, or $8,752, in the 2012-2013 academic year, compared to 37% in the 2009-2010 year. These numbers do not include borrowing by parents on behalf of their children, which also declined during this period, and are solely based on parents’ income and savings. The annual report surveyed 1,602 undergraduates and parents of undergrads this year
Student borrowing is also on the rise, contributing to 18% of the total spent on college, up from 14% in 2008.
In the wake of the Great Recession, family budgets for college have dropped as students increasingly eliminate schools based on price, according to the study. Seventy percent reported removing pricey schools during the application process last year compared to 58% in 2008.
“It’s not surprising the economic downturn would impact family incomes,” says Mark Kantrowitz, senior vice president and publisher of Edvisors Network, an educational resource site for parents and students. “Everything else would proportionally decrease as they tried to make ends meet.”
Tuition is the main revenue creator for colleges, but many are having to increase their grant offerings to attract students. Sallie Mae’s survey found that today, two-thirds of families are using grants to pay for college, an increase from 50% five years ago.
As the economic recovery remains stagnant, more families are relying on college savings plans this year. Sallie Mae reports families across all incomes have increased their use of 529 savings plans, and 17% used these plans to pay for college this year, up from 12% in 2012.
Kantrowitz expects grads’ debt levels to continue to rise as total loan debts surpassed the$1 trillion level for the first time last year. The College Board reports a tuition at an out-of-state public four-year college is $30,911 this year, compared to $17,860 for a four-year in-state public school tuition.
“Family incomes have been flat for a decade, they don’t have any degree of elasticity to ensure costs and price,” Kantrowitz says. “As family incomes increase, we might see a reduction in the utilization of college savings, and more contributions from income.”