Sallie Mae Survey Finds Parents, Students Increasingly Turn to Scholarships and Grants for College
Posted By Donna Fuscaldo on July 14, 2016 at 12:50 pm
The cost of a college degree isn’t getting any cheaper, but the amount families spend is on the decline thanks to scholarships and grants, according to a new survey by student loan lender Sallie Mae. The survey reports families are spending less in the 2015-2016 academic year compared with 2014-2015 largely because they are relying on scholarships and grants to cover more of the cost.
Scholarships and grants covered 34 percent. “More scholarships means less money out of families’ pockets to pay for college,” says Abby Brooks, a spokeswoman at Sallie Mae. “Scholarships have become an increasingly important part of the pay-for-college mix.”
Scholarships, grants cover largest portion of school costs
Sallie Mae found in the national study, How America Pays For College, conducted by Ipsos, that the percentage of families using scholarships and grants to pay for a portion of school was the largest in the past five years. What’s more, middle income families are more apt to use scholarships than their low and high income peers.
That’s not to say higher earning families aren’t turning to scholarships as well. Sallie Mae found 43 percent relied on scholarships and grants and 46 percent of low income families did. That compares with 55 percent of middle income students. The study interviewed 799 parents with children between the ages of 18 and 24 who are enrolled as undergraduates and 799 undergraduates in the same age range.
Scholarships and grants have been around forever, but not everyone has taken full advantaged of them. That is changing with the skyrocketing cost of a college education skyrocketing. The shift also comes at a time when parents and students are increasingly balking at borrowing money to pay for an education that may or may not land them a high-paying job. The internet is littered with stories about out-of-work graduates staring at mounting student loan debt that they can’t afford to address.
Still Sallie Mae found an overwhelming percentage of survey respondents believe college is an investment in a student’s future and expect their child to earn a bachelor’s degree. Yet many are thinking twice about student loans as a means to achieve that goal. “Most families are willing to stretch themselves financially to pay for college, but they’re finding ways to make college more affordable, and that means they’re borrowing less,” Brooks says. “In 2015-16, borrowing covered 20 percent of annual college costs. The amount that doesn’t have to be repaid was twice as high as the proportion of funds borrowed.” Students attending pricier schools were more likely to borrow money in the 2015-2016 school year compared with those at cheaper institutions.
Scholarship and grant winners also earned more than their counterparts a few years ago. According to Sallie Mae, the average amount awarded from scholarships increased $1,300, or 17 percent, while the average grant amount increased $200, or around 3 percent, in the past five years.
Spending reductions help pay for higher education
Families aren’t only applying for multiple scholarships to fund a college degree, they are also curbing spending to reduce their reliance on loans. Sallie Mae found 98 percent engaged in one cost saving action with the majority taking five or more. Some of those measures include living at home, working during the school year, reducing personal spending and graduating quicker. More than one-quarter are aiming to earn their degree in less time that is typically required.
Making college affordable is on the minds of millions, resulting in some positive actions on the part of families to keep a lid on the costs. But that doesn’t mean all families are making smart decisions when it comes to choosing the school to attend. Consider this fact from the Sallie Mae survey: 67 percent of families narrow their school choices by cost but push the price to the back burner when it comes to the final decision, ultimately weighting the academic program and personal choice more than cost. “Even though most families agree in the value of a college degree, only two in five families have created a plan to pay for college,” Brooks says. “Families who plan are able to save more, have the ability to spend more, and borrow less.
No, scholarships don’t cover the lion’s share; families paid an average of $23,688 for college in 2015-16, and scholarships funded 19%–or $4,501—of that amount. Families with students attending a 4-year private school used more scholarships than families with students attending a 4-year public or 2-year private school.