How Will YOU Pay for College?

by Ron Haynes

Sallie Mae and Gallup teamed up to determine how families really pay for college and the results were surprising – at least to me. Interviewing 1,404 respondents by telephone during the month of May, the study found that the majority of student’s expenses are absorbed by their parents. No surprise there.

Average percentage of total cost of attendance paid for each source

  • 36 percent of expenses were paid by parental savings or income
  • 25 percent of expenses were paid by grants or scholarships
  • 14 percent of expenses were paid by student borrowing
  • 10 percent of expenses were paid out of student savings or income
  • 9 percent of expenses were paid by parental borrowing
  • 6 percent of expenses were paid by friends or relatives

Remember, this is how the average family paid the total bill. Those number change drastically depending on parental income. As parental income decreased, the amount of grants and scholarships rose. If you’re like the average American, you’ll use a similar combination of these options.

That means that 71 percent of college expenses were paid without borrowing and that’s great, but 5 percent of students paid their college expenses with a credit card (ugh). Buried down in the report was an interesting little nugget: Families who BORROWED, spent more money than those who didn’t, exceeding the non-borrowers by 33 percent!

This finding would seem to support the oft cited axiom that borrowed money is more easily spent than non-borrowed money.

As my oldest daughter prepares to enter her freshman year, we’ve been fortunate that she was a good student and has the majority of it paid for by scholarships, two of which totaled almost $13,000 per year. Of course she has to maintain those but she’s not one to give up … thankfully. The balance of her college education will be paid for by the 529 plan her mother and I have for her as well as a separate savings account we’ve set up. It was a GREAT feeling checking the REJECT box on her financial aid papers for student loans.

Get more information on a private student loan consolidation through a Credit Union HERE!

For the record, I personally paid off $50,000 in student loans for two runs at undergraduate school and one completed MBA. I didn’t want her saddled with that debt so her mother and I made sure:

  • Our daughter was tutored. We wanted her as prepared for college and it’s admission tests as possible.
  • We set up a 529 plan. You can set these up at Scottrade very easily and then make regular contributions.
  • We had a savings account that we also contributed to. Saving money HAS to become a HABIT.

What are your plans to pay for college? Will you borrow? Is it worth it? Have you made plans to finish your education?

About the author

Ron Haynes has written 1001 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 9 comments }

Zach Younkin

I am currently working on paying for college all by myself!

I do put it on a credit card however, as I get rewards points, but with 4 quarters paid for, I am completely debt free!!

Ron

Zach, that is Awesome! Congratulations! When you put in that much hard work, you have a lot to be proud of.

PT Money

Interesting stats, Ron. I used a combination of scholarships and loans. In hindsight the loans (which I maxed out) were not that necessary.

Ron

Thanks. I think it’s important to remember that these are just averages. You ought to check out the full report. It had a ton of interesting little nuggets in there!

Payment protection insurance

My daughters are just four and two years old and already I worry about college. I also worry about if whether I am going to be able to raise financially responsible kids. So I made a commitment to myself to always be financially responsible myself so they will also learn from me by example. If we practise managing our finances now, we will be more prepared and equipped for college. I am thinking of saving up as early as now and have my kids help as well.

Deacon

Only 14% paid for college through borrowing money seems very low. I’d figure with $1 Trillion in student loan debt that it would be closer to 50%.

Ron

Yeah, I was surprised too. I guess that tells me that the amount we spend on college is a far bigger number than I ever thought.

Let's Learn Finance

Unless you improbably called 1404 Harvard students!

Let's Learn Finance

HECc debt for me. Should end up with a $30k student loan at the end of this under-graduate course..

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