Survey Says: Families Perceive College Costs as Increasing by 17% Compared with Last Year
August 09, 2010
Sallie Mae and Gallup just released the results of their third annual survey of how American families pay for college. The survey found that families perceived college costs as increasing by more than 17% compared with last year. As a result, families are becoming more cost conscious in their college choices.
Family estimates of the total cost of attendance increased 17% from $15,931 in 2008-09 to $18,659 in 2009-10. The amounts families said they paid to cover all college costs increased even further, from $19,432 in 2008-09 to $24,097 in 2009-10, a 24% increase.
This college cost data is self-reported and reflects family perceptions of college costs. Actual increases in the cost of attendance are much lower as measured by the College Board (4.4% to 7.3%) and the tuition inflation component of the Consumer Price Index (6.0%). But it is the family perceptions of college costs that influence their behavior.
Almost three-quarters of the survey sample attended public colleges, which may partly explain the dramatic increase in perceived college costs. College tuition rates in California increased by 32% this year, with double digit increases also in Arizona, Florida and a handful of other states. Public college tuition rates are likely to experience double digit increases again next year, when the stimulus bill funding runs out. State income tax revenues have not recovered enough to replace the stimulus bill funding, and state support of higher education is one of the first budget areas cut by the state legislature. When state funding decreases, public colleges are forced to raise tuition to compensate.
Lenders have also tightened credit criteria for the types of non-federal debt often used to finance a college education, such as private student loans and home equity loans and lines of credit. This may have forced more families to pay for college from savings, making them feel as though the college costs have increased dramatically. Spending from income and savings has a more direct impact on the family budget than borrowing. The Sallie Mae survey found that the greatest increase in spending was from parent income and savings, with a particularly dramatic increase in spending from college savings plans.
Families have also reported taking a variety of cost-saving steps to meet college costs, such as reducing spending (73%), increasing work hours and earnings (48%), having the student live at home (43%), using tax credits and deductions (43%), accelerating education to finish quicker (30%) and choosing a less expensive college (23%). The percentage choosing a less expensive college was much lower this year (23%) as compared with last year (48%). 99% of families took at least one cost-saving measure and 78% took two or more.
There were significant racial differences in the types of cost-saving measures utilized. Minorities were more likely to live at home, with 64% of Hispanic students, 58% of African-American students and 36% of White students choosing this option. They were also more likely to choose a less expensive college, with 35% of Hispanic students and 33% of African-American students compared with 19% of White students. Hispanic students were more likely to enroll part-time (32%), compared with 22% of African-American students and 11% of White students. African-American students were less likely to work more or increase their earnings (40%), compared with 52% of Hispanic students and 50% of White students.
The sources of money used to pay for college costs include parent income and savings (37%), grants and scholarships (23%), student borrowing (14%), parent borrowing (10%), student income and savings (9%) and friends and relatives (7%).
The increase in college costs has caused a significant increase in the number of families who are worried about further increases in tuition, from 35% in 2008-09 to 49% in 2009-10. 38% are worried that student loan interest rates will increase, compared with 22% the year before. 34% are worried about scholarships and grants becoming less available. 33% are concerned about job loss, up from 23% last year, and 27% are concerned about their child’s ability to get a job, up from 18% last year. Concerns about decreases in the value of savings and investments are virtually unchanged at 33% in 2009-10 and 31% in 2008-09. But 31% are concerned about decreased availability of student loan funding. These results confirm the findings of a previous college decision impact survey by Fastweb and Maguire Associates.