Sallie Mae reports that American families are finding various ways to cut college costs. They are relying more on out-of-pocket contributions and less on student loans.
How America Pays for College 2014 finds that families are adopting multiple strategies to reduce the cost burden of paying for college, such as opting for in-state tuition (69%), living closer to home (61%) or at home/with relatives (54%), filing for education tax credits (42%), getting a roommate (41%)6, accelerating the pace of coursework (28%), or not deferring payments on student loans (23%). Not only was the choice of an in-state school the most frequently mentioned response, it is also most likely to be mentioned if only one cost-saving measure is adopted by the family. Most families, however, are likely to adopt a combination of cost-reduction approaches, such as opting to go to school in state and living at home or with relatives (43%).
Paying from current income and savings increased while borrowing decreased.
A significant source of college funding comes from the income and savings of families known generally as “out-of-pocket” contributions. In 2014, American families reported that out-of-pocket spending from parents and student combined was $8,850, accounting for 42% of the total amount paid for college. This breaks a three-year trend in decreasing out-of-pocket spending (46% in 2010, 41% in 2011, 40% in 2012, and 38% in 2013). Compared to 2013, American families increased their contributions from income and savings by $839 while decreasing the total spent on college by $295.
How the Typical Family Pays for College, Year-over-Year
Families’ use of borrowed money used to pay for college in 2014—a combined parent and student amount of $4,610— dropped to the lowest it has been in five years. Borrowed funds paid for 22 percent of college costs in 2013-14, a decline from 27 percent the prior year. Student borrowing (15%) accounted for twice as much as parent borrowing (7%).