Sallie Mae’s annual How America Pays for College report has some good news: In the 2015-2016 school year, the average amount families spent on college went down slightly, to $23,688. The biggest decline came on spending for 2-year colleges; families with students in 4-year schools reported spending about the same as in the previous year. In addition, scholarship funding went up, with scholarships covering approximately 34% of costs in 2015-2016, compared with 30% in the previous school year.
- Funding sources: This graphic (from the report) shows the breakdown of funding sources:
- The average amount spent at 4-year private colleges was $41,762. At 4-year publics, it was $23,290.
- 70% of students received a scholarship or grant
- Less than 1/4 of students did not contribute to the cost of their education, either through earnings or loans.
- About 40% of families borrowed to pay for college. Significantly, those who borrowed spent considerably more on college than those who did not: almost $30,000 on average for borrowers compared with just over $19,000 for non-borrowers.
The report also showed some good decision-making by families of college students:
- About 2/3 considered cost in their college selection, and more than half chose not to apply to colleges that were out of their price range
- Most used a combination of savings and income (cash flow) to pay for college. This enables families to take full advantage of education tax breaks including those for 529 plans and those for tuition and fees.
- Among borrowers, about 70% stuck with the federal student loan programs
- Only about 5% of families used retirement funds to pay for college.
Finally, the report showed that planning for college pays off: In families who planned, parents saved 3.5 times more than in those who did not, and students whose families planned for college borrowed 1/3 less than those whose families did not.
The full report is available here.