New study shows how Americans pay for college

BY HOLLY FOX, MEDILL NEWS SERVICE

How do you pay for college?

That was the subject of a new study released yesterday by Sallie Mae.  The survey, conducted by Gallup,  covered parents’ and students’ use of different funding sources as well as some of their attitudes toward the cost of education and various types of debt.

While this information reveals the importance of both borrowing and parental contribution for the average American student’s education, the study also emphasizes the significant variation in individual families’ experiences.

For example, some niche funding sources contribute a significant portion of college funds for those families that use them. While only 3 percent of families relied on home equity, those who did borrowed from it heavily, an average of $10,853.  The same can be said of the use of private loans.  While private loans were used by just 8 percent of students, the average amount borrowed was $7,694. This is quite a bit higher than the $5,075 average amount of federal loans borrowed by 28 percent of students.

Most revealing were the questions that attempted to determine the attitudes toward education financing held by parents and families.

Higher education is considered a critical step by both parents and students in achieving the kind of life they  want as adults.  74 percent of students and 69 percent of families felt that going to college would lead to a better quality of life.  Earning more money and preparing for a desired career also scored high.  These dreams are so strong that:

• 37 percent of students and 46 percent of parents did not eliminate schools at any stage of the decision-making process based on cost
• 70 percent of students and parents said that the student’s future earning potential was not considered or did not impact their borrowing decisions
• 75 percent of parents and 87 percent of students would rather borrow to pay for college than not go at all
• Student debt was second only to mortgages in terms of acceptable debt, with 60 percent of parents and students considering it acceptable

Something that’s come up in discussion with my colleagues is this concept of “good debt.”  Good debt is only good in getting better credit, which allows you to take on more debt.  A generation ago people worked hard to pay off their houses and, primarily because the cost was significantly lower, were able to pay for their children’s education without going into significant debt.  Now the importance of college has overshadowed the very real costs.  This may be the most expensive decision parents and families make with such little regard for the economic consequences.

Photo by Casey Francis and used under a creative commons license.

Tags: college costs, student loans, survey