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Survey Says: Financial Considerations Affecting College Choices

Mark Kantrowitz

August 19, 2009

Sallie Mae and Gallup just released the results of a survey of how American families pay for college. The survey found that families are becoming more cost conscious in their college choices. Nevertheless, the majority of families still see college as a necessary and worthwhile investment in their children’s future.

Students from higher income families were more likely to enroll at more expensive institutions. The average cost of attendance was $23,817 for students from high-income families (earning more than $100,000 a year), compared with $16,955 for students from low-income families (earning less than $35,000 a year) and $17,383 for students from middle-income families (earning $35,000 to $100,000 a year). Income also affected the type of college. Students from families earning less than $35,000 a year were more likely to enroll at community colleges than students from families earning more than $150,000 a year (27% versus 10%) and less likely to enroll at 4-year private colleges (16% versus 35%).

There were also geographic differences in enrollment at more expensive colleges. 45% of students from the northeast enrolled in private 4-year colleges, compared with 17% from the midwest, 14% from the south and 13% from the west.

More affluent families were less likely to borrow. 24% of families earning more than $150,000 borrowed, compared with 49% of families earning less than $50,000, 45% of families earning $50,000 to $100,000 and 38% of families earning $100,000 to $150,000.

Overall, willingness to borrow declined as compared with the previous year’s study. 53% of students said that they would rather borrow than not attending college, compared with 67% last year. Still, education loans enabled many students to enroll in college. If they didn’t have access to student loans, one third (33%) would have delayed enrollment or not attended this year.

Students from families that borrowed to pay for their education attended more expensive colleges than students from families that did not borrow for college. The average cost of attendance was $22,821 for the students from families that borrowed, a third greater than the $17,143 average among students from families that did not borrow. The amount borrowed was almost half the cost of attendance. This suggests that students were using debt to enable attendance at a more expensive school (or conversely, that attendance at a more expensive college was more likely to require borrowing).

The primary reasons for borrowing education loans as opposed to other types of loans included a preferable interest rate (20%), convenience (17%), availability (13%), and couldn’t borrow other types of loans (10%). This compares with the use of credit cards to pay for school, where the primary reasons included convenience (65%), emergency or unplanned expenses (14%) and a preferable interest rate (4%).


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