Cash for College? Why Americans Are Shunning Student Loans
These days, it’s nearly impossible to fit “college” and “affordable” in the same sentence. But more and more families are finding ways to pay—without taking out massive student loans.
According to a study by Ipsos Public Affairs and Sallie Mae, in the 2013-2014 academic year, 42% of college costs were paid out of pocket by families, up from 40% last year. Families borrowed enough money to cover just 22% of college costs, compared to 27% last year. The question is: If tuition is rising faster than inflation, how are families able to pay more?
One especially significant reason for the decrease in borrowing, according to Clifford Young, president of Ipsos Public Affairs, is that many families are finally recovering from the recession. Another theory is that Americans are starting to place a higher value on a college education. The survey found that the overwhelming majority (98%) of parents see college as a positive investment in their children’s future, and that most are willing to stretch their budgets in order to afford it.
Recently, colleges have also been offering more scholarships than they did in the past, Sarah Ducich, a senior vice president at Sallie Mae and co-author of the report, told USA Today. And, according to the study, more students are attending two-year colleges than at any point in the past seven years. Families are looking to cut costs in other ways, too, like renting instead of buying textbooks and having students live at home.
Though more families may be able to cover (at least part of) the cost of college, many are still struggling—after all, student loan debt is at an all-time high, adding up to over $1 trillion.
Worried about how to tackle the high price tag of a college education? Consider applying for a work-study grant when your student enrolls. If you still have years to go before freshman orientation, check out our top tips for investing in a college savings account.