Smart SpendingSmart Spending

Parents are paying less of kids' college bills

A new survey says parental contributions dropped 35% in the past 3 years. Grants and scholarships -- and smarter choices -- are filling the gap.

By Donna_Freedman Jul 23, 2013 10:21AM
Logo: Graduation cap (Stephen Wisbauer/Getty Images)

Sallie Mae's annual "How America Pays for College" survey makes for some pretty interesting reading. Short form: Parents are paying less, students are borrowing more, schools are kicking in additional funds and families are (sometimes) making smarter choices.

The average annual college cost was $21,178, about the same as last year. But parents are paying a smaller share.

A lot smaller: The average parental contribution has dropped 35% since 2010.

Not because they're stingy, but because they don't have the money, study authors say. Salaries are stagnant. The costs of food, fuel, insurance and other basics keep rising. People's sense of overall net worth has dropped (thanks, housing bubble!), causing them to cut back on many types of spending.

So who's picking up the slack?

Grants and scholarships -- many from the colleges themselves -- are now "the largest contributor" toward total costs. There's also a trend among families to keep costs down from the start:
  • 67% of families rejected potential colleges based on price.
  • 57% of students live at home or with relatives.
  • 27% of students are accelerating their coursework to graduate faster.
"Pre-recession parents were willing to (contribute) more . . . We're really seeing a new approach to paying for college," says Sarah Ducich, senior vice president for public policy at Sallie Mae.

Not that all students are looking for handouts. Just over half are putting savings and current income toward tuition, and about the same number increased their work hours. Nearly one-third of students also borrow money, an average of $8,815.

Released today, the sixth annual survey was conducted last spring, i.e., during the second half of academic year 2012-13. This means that families are reporting actual amounts spent versus what they thought they might spend.

Surprises in store?

While some smarter choices are being made, not everyone’s keeping an eye on the big picture.

Forward thinking is too often absent. Half the families interviewed don't have contingency plans in case of illness, job loss or other emergency. Two-thirds don't have a specific blueprint for paying for college from year to year.

Some parents aren't even clear on the total price, or how long they'll be expected to contribute. About four in 10 report being surprised by the costs of textbooks and other equipment, and 92% of parents assume their students will graduate within five years. But other national studies indicate that for up to 70% of students, it will take a full six years to get a bachelor's degree.
"We think there will be some surprises for families during that fifth or sixth year," Ducich says.

Sallie Mae's Education Investment Planner tool lets families compare costs at 5,500 colleges around the United States. It also gives a reality check by comparing estimated monthly loan payments with the starting salary you'd need in order to afford them.

Know before you go

Use that planner, or any other tool you can find, to get a clearer idea of the true cost of college. Explore your plan from every angle. For example, if you plan to get Junior through by working overtime and trimming the budget ruthlessly, don't forget to factor in the impact on the rest of your family -- and on your own physical and emotional health.

Have you planned for transportation costs like airline tickets or a shuttle service from airport to campus? What about repairs and insurance for your commuting student's vehicle, or the inevitable rise in gas prices?
Laptops are pretty much essential, since there are never enough computers in the library or lab. That's a big expense but expect to be nickeled-and-dimed to death, too. Shoes may wear out faster, since some students walk miles every day. You can't even bring sheets from home because of the extra-long dorm bed.

This kind of talk isn't gloomy. It's practical. If you want gloomy, try this: More than half of all student loans are currently deferred.


It's encouraging that families are getting smarter about cutting costs. But here's my advice: Don't get too comfortable.

Having your student stress out over every dime isn't conducive to an optimum college experience. However, a "don't worry, be happy" attitude might lull them into a false sense of security about the debt with which they might be graduating.

Belief in the value of college is unwavering: 85% of parents "strongly agreed" that it is a good investment in the future. I think so, too. Just know going in what it's going to cost. Hope for the best, plan for the worst and don't forget the extra-long mattress pad.

More on MSN Money

Jul 23, 2013 1:04PM
5-6 years ..... for a bachelor's degree ?? 

 Got mine "back in the day" in 4 yrs in chemistry, but the last semester was a "across the line" at 7 hrs - that last semester allowed me more time to work and job hunt. I had multiple part time jobs all through college and no debt coming out.   

 My daughter is on track for the BS in 3.5 years, then straight into grad school. She could have her Masters degree before apparently (70%, really?) even complete their bachelor's degree.

Son is planning on 6 years, but for a Pharm D which is standard.  

 Wasted time in school is wasted money. So at the ~ 21k/yr average this article quotes that is an extra 42 grand these students are wasting.   If someone isn't sure what they want to do, sit out 2 years,work a low paying job then use that time to figure out what you want to major in, then go back to school. Saves you 42k, right there. 6 years is just crazy.  
Jul 23, 2013 12:19PM
Although you may get better rates co-signing for your kids, it's better to make they get loans in their own names. When they graduate, you can help them if you can, if not, your not on the hook for the money.

Aug 10, 2013 6:08PM
Students should be responsible for their own debts. I paid for college with the help of a scholarship and student loans because my parents simply could not afford to help contribute.   I think the student loan debt helped me become more financially responsible because I had no one to bail me out.  I did not buy want I could not afford and once I graduated, I paid off my loans within three years.  It gave me the right mindset about money from the get go.  If I wanted something, I had to pay for it.  And if I could not afford it, I had to find away.  I feel bad for people who have always had things just handed to them. I feel they will have a more difficult time navigating life without knowing to provide and take care of themselves. 
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.