A report out today shows that a growing number of parents have felt comfortable over the past few years paying more out of pocket for college tuition.
A new study by Sallie Mae has found that for the first time since 2010, parent income and savings comprised the largest share of college costs: 32 percent, compared to 30 percent for scholarships and grants.
Marie O'Malley, senior director of consumer research at Sallie Mae, credits an improving economy for the trend. She discusses the study with Here & Now's Peter O'Dowd.
Peter O'Dowd: So you do this survey every year, but you found in 2014 and 2015 that parents are spending a whole lot more on college.
Marie O'Malley: What we saw, I would say back in 2010, which is what we kind of saw as a peak spending year, and after that with some of the changes and worries in the economy, spending in college dropped and it remained fairly steady among our survey population for the next four years. And that’s not to say college costs did not rise during that time, but what families were doing was sort of controlling costs in ways that they could. So whether it was living situations, ancillary expenses, books, personal expenses, things like that. And what we saw this year, this past year, 2014-2015, was really a rise.
Peter: And why is that?
Marie: What we looked at was where was the money coming from and what were some of the attitudinal perceptions that were going on. So as far as where money was coming from, we saw that parents were actually contributing a lot more out of pocket than they had in the previous four years. This is the first year since 2010 that the share of costs of college, the number one share was parent income and savings - which it had been back in 2010, but then as [parents] pulled back, scholarships and grants had come in to fill the void. It’s not to say that scholarships and grants aren’t still an important piece of how families pay, but parents stepped up and paid more in the past year.
Peter: What are the implications of that, if parents are spending more out of their savings and out of their paychecks?
Marie: It really is out of their paychecks. Savings I would say were stagnant relative to last year. We have a series of attitudinal questions that we ask parents. Some are about affordable actions that families take and others are about parent worry. What we saw this year with parents is their worry levels around paying for college has dropped considerably. This year for example, only 13 percent of parents were worried their child would find a job after graduation, that compares to 27 percent last year. Fewer parents are worried about their incomes going down due to job loss relative to last year and fewer are also worried about student loan rates increasing. So because they’re less worried about their economic situation, it appears they are more willing to invest a little bit more in college.
Peter: And as your survey points out, this is happening most commonly with families that make over $100,000 - the wealthier families. And so what’s that a sign of in your opinion? Because you might say that this is another indicator that the richer families are getting now further ahead than other families if they're willing to invest so much more.
Marie: The gap is widening. The gap between high income and middle and low income families is about $12,000, in terms of the average spend, whereas last year it was only about $7,000.
Peter: It makes you think, as we’re talking about people investing more money in college, if there will ever come a point when families say, “Look, I am not going to pay any more for college." There’s been so much talk about how expensive college has gotten, and yet we’re still paying more.
Marie: One of the things that we’ve seen consistently with the families that send their children to college is that they consistently believe in the value of college. Ninety-seven percent of survey respondents consider college to be an investment, and 85 percent consider it an extremely strong investment.
- Marie O'Malley, senior director of consumer research at Sallie Mae.
This segment aired on July 20, 2015.