How Do College Kids Pay for Their Education?

Millions of young adults across the country are now thinking hard about the ways in which they will pay for their higher educations, and most plan to tap a number of sources to help them cover these costs.

Tuitions for most universities have risen significantly in the past few years and, coupled with the economic downturn that saw many take significant financial hits, that has led many of the nation’s college-bound young adults to seek new ways of financing their educations, according to a new study from polling firm Ipsos on behalf of student loan issuer Sallie Mae. This has become especially important as many companies now essentially require a college degree for even entry-level positions, and is reflected strongly in consumers opinions about the importance of going to institutions of higher learning.

Is college an investment?

In all, 83 percent of college students and their parents agree that college or university attendance is an investment in their future, and 70 percent believe going is now more necessary than it ever has been, the report said. Further, 69 percent also recognize that going to college is a wise path for earning more money.

Because many recognize the financial constraints college may put on them, more focus is being put on a number of sources to help pay for all the associated costs, including tuition, room and board, spending money, and so forth, the report said. Between savings, income and loans, students are now paying 30 percent of their education bills, up from 24 percent in a similar poll conducted four years ago. Meanwhile, the share parents pay has dropped to 37 percent, down from 45 percent.

And new financial realities are also shaping families’ college decisions, the report said. The percentage of families who skipped on some college choices because of the cost involved with attending that institution climbed to 69 percent, the highest proportion in the five years since the study began. In addition, 51 percent of students are now living at home to cut costs, 55 percent have added roommates, and both parents and students have cut some of their own spending, at 50 and 66 percent, respectively. Finally, 45 percent of respondents took a tax credit or deduction available to them.

Further, 29 percent of college students are now enrolling in lower-cost community colleges, up from 23 percent two years ago, and the average family is now paying 5 percent less for college than they were just last year. The average degree from a two-year public school costs about $10,053, with the average four-year public degree costing roughly double at $20,518. However, the average four-year private degree cost families $34,532.

How college is being paid for

Interestingly, only about 35 percent of students said they used education loans to help them pay for their college degree, the report said. That comes from 25 percent using federal loans exclusively, 9 percent using a mix of government and private lending, and just 1 percent only using private loans.

In all, the average American family covers college costs by tapping as many as seven different methods, the report said. The largest proportion, at 29 percent, comes from students qualifying for grants and scholarships. Another 28 percent comes from the students’ parents chipping in from their income and savings. In addition, 18 percent comes from student borrowing, and 12 percent comes from their income, while 9 percent comes from parent borrowing. The remaining four percent is derived from contributions from friends and family members.

In all, 81 percent of students completed applications for education loans from the U.S. government through the Federal Application for Federal Student Aid program, the report said. Meanwhile, scholarships come from a number of different organizations, but the vast majority of students (73 percent) used those issued by the schools themselves, the report said. Another 27 percent tapped funding from community groups and nonprofits, while 26 percent used their state government’s scholarship options.

Student loans are typically crucial to helping college kids afford their educations, but at the same time, they can be extremely troubling. Recent statistics show that the average college kid now graduates with more than $45,500 in student loans in their name, which can make it difficult for young adults to begin paying off soon after they leave school, and hinder their ability to become financially independent. This problem may be compounded by sizable credit card debts that many college kids have been known to rack up, which can total as much as a few thousand dollars.

Missing payments on any kind of balance can also take a significant toll on your credit score, so it’s important for you to be financially ready to start making contributions to these accounts as soon as possible to avoid having to figure out how to raise your credit score if it has been damaged.

Posted in Finance
Learn how it works

Questions about credit repair?

Chat with an expert: 1-800-255-0263

Facebook Twitter LinkedIn