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More Scholarships, Fewer Loans Financing College: Survey

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Students and families seem to be adjusting to the rising cost of college.

Four out of five are attending colleges in their home state and one out of three are attending community colleges – both lower cost options for students, according to the latest Sallie Mae and Ipsos annual survey “How America Pays for College.”  

In addition, many students are working throughout their academic year or during breaks (77%), cutting personal spending (62%), living at home during the school year (49%) and accelerating graduation in order to reduce costs (27%), according to the survey.

Among families, 85% reported filing the Free Application for Federal Student Aid (FAFSA), which is required for students to receive financial aid from any college, public or private.

Cost-consciousness about college financing is manifesting itself in other ways, too, according to the survey. Sixty-seven percent of families reported they had scratched schools from their list of potential candidates due to costs, and costs were the dominant factor cited by students for changing their original choice of school or transferring to another once they had enrolled (27%).

Cost was also the chief consideration for those students who chose to attend a two-year public college as opposed to a four-year institution.

College costs rose roughly 3% in the 2015-2016 academic year from the previous year, according to the College Board, but families spent the same amount to finance college costs, according to the Sallie Mae Survey.

Filling that gap were scholarships and grants. They accounted for 34% of college financing for the average family in the latest academic year, the highest portion  since at least the 2011-2012 academic year. according to the Sallie Mae report.

“Families wrote smaller checks for college this year as they looked less to their wallets and more toward free money to make college happen,” said Raymond Quinlan, chairman and CEO of Sallie Mae, which is the largest provider of private student loans. “Scholarships and grants have become an increasingly important part of the pay-for-college mix.”

About half of all families reported receiving some type of scholarship to help pay for college in the 2015-2016 academic year; scholarships were especially popular among students attending private four-year colleges.

More than two-thirds of those students received some type of scholarship, and scholarships paid for about one-quarter of their college costs. In comparison, 55% of students attending a public four-year college received scholarships, which accounted for just 16% of costs.

As a result of all these developments, loans accounted for a smaller portion of college financing than in years past – 20% versus 22% to 25% in the previous four academic years – and families, along with students, spent less from income and savings to pay for college – about 6% less.  

Student loans fell to just 13% of college financing, down from 16% the previous year and 18% in the  2011-12 and 2012-13 academic years. (Parental loans accounted for 7% of college financing) And nearly three-fourths of students paid for college in 2015-16 without student loans, according to the survey.

Students who did borrow relied primarily on federal student loans, borrowing an average $7,378, or 6% less the prior year, as well as private educational loans, averaging $8,998, down 26% from the previous year.

After scholarships and grants, parental income and savings were the second biggest funding sources to pay for college, accounting for 29% of costs; student income and savings accounted for 12%.

Current income was the biggest source of the contribution from parental income and savings (62%) while college savings plans, including 529 plans, accounted for just 20%, followed by others saving and investments (10.5% and retirement savings 7.2%).

The average amount families spent on college in 2015-16 was $23,688, slightly less than in 2014-15, but costs varied widely depending on the type of institution. On average, $41,762 was spent to attend a four-year private college; $23,290 for a four-year public colleges, and $9.840 for a public two-year institution — down sharply from $13,531 during the 2014-15 academic year.

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