Survey Finds That Many Families Don’t Borrow for College

Repost for an article from today's NYT. Interesting juxtaposition between education and the economy. Not sure how it makes any sense but as long as people are still going to college!

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August 24, 2009, 10:27 am

Survey Finds That Many Families Don’t Borrow for College

By Rebecca R. Ruiz

Tuition keeps going up and salaries aren’t keeping pace, but a lot of families, it seems, are able to pay for college without taking out loans.

A new study titled “How America Pays for College,” done by the Gallup organization for Sallie Mae, the nation’s largest provider of student loans, found that in the 2008-2009 school year, 58 percent of families did not borrow money for college.

As surprising as that figure might be, it is a decline from the previous year, when 61 percent of families paid for college without loans.

Student attitudes toward borrowing, however, seem to have changed, according to the survey, with fewer students saying they would rather borrow than not attend college.

According to this year’s survey, students who did not borrow for college got tuition money from their parents’ income and savings and from grants or scholarships.

The survey found that for the average American family, (including those that took out loans) such grants and scholarships covered 25 percent of a student’s costs. And of the subjects sampled — 1,600 students and parents across the country — more than half received such aid.

The contribution to total expenses made by grants and scholarships is up from 15 percent last year, suggesting that students have come to rely more heavily on such awards in a difficult economy.

For the average family, the survey found, the rest of the cost came from borrowing by the student and his or her family (23 percent), the parents’ income and savings (36 percent), the student’s income and savings (10 percent) and gifts from relatives and friends (6 percent.)

This year’s survey also identified a correlation between borrowing and the cost of education. Those who borrowed (42 percent of the survey sample), spent an average of 30 percent more on college than those who did not borrow.

And there were demographic distinctions between those who borrowed and those who did not.

Hispanic respondents reported borrowing to pay for 32 percent of costs, African Americans for 34 percent, and Caucasians for 22 percent. Hispanic respondents, the survey said, were also the most cost-conscious, while receiving fewer scholarships and grants than African-American and Caucasian students.

(According to the survey, Hispanic students received an average of $4,442 in scholarship and grant aid, compared to $5,268 for African-American students and $5,021 for white students.)

The survey also sought to gauge more subjective confidence levels of students and parents in meeting tuition payments.

Sixty-seven percent of parents were optimistic about their ability to finance a child’s education in years to come. But 31 percent were worried about dwindling personal assets, compared with 17 percent last year.