how america pays for college 2013

Driving Uncertainty into Opportunity

How America Pays for College 2013

Conducted by Ipsos Public Affairs

Sallie Mae’s National Study of College Students and Parents

Sonja McMullenDirector, Business DevelopmentSallie Mae

Driving Uncertainty into Opportunity

Background

Study Objective • Determine how American families are paying for college

– Trend over time behaviors and attitudes related to the purchase and value of higher education

Methodology• Sixth annual survey and report

• Quantitative telephone interviews conducted April-May 2013– 800 undergraduates enrolled AY 2012-13, ages 18-24

– 802 parents of undergraduates

• Composite of how the ‘typical’ family pays for college is a mathematical representation created in 2008 and applied consistently each year. – The composite illustrates the proportion of funding by category that pays for all college costs across all families.

Driving Uncertainty into Opportunity

Attitudes and Values

Driving Uncertainty into Opportunity

Optimism Emerging

• Belief in the value of college is unwavering

• Parents continue to worry about paying for college, but to a lesser degree

• Parents are more optimistic than they have been

• Only 9% of families considered their student not attending college at all due to cost

Driving Uncertainty into Opportunity

0%10%20%30%40%50%60%70%80%90%

100%

2008

2009

2010

2011

2012

2013

2008

2009

2010

2011

2012

2013

2008

2009

2010

2011

2012

2013

2008

*20

09*

2010

2011

2012

2013

Willing to StretchFinancially

Rather BorrowThan Not Go

An Investment inThe Future

Degree More Important Now

Strongly Agree Somewhat Agree *Not asked in 2008 or 2009

Agreement with Value of College, Year-Over-Year

Driving Uncertainty into Opportunity

Agreement with Reasons for Attending College, Year-Over-Year

Needed for Job

Earn More Money

Expected in Family

AmericanDream

20092010

20112012

20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20092010

20112012

20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20092010

20112012

20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20092010

20112012

20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strongly Agree Somewhat Agree

Driving Uncertainty into Opportunity

Fifteen Percent Fewer Parents are Worried this Year

Home Value Will Decrease

Value of Savings Will Be Lower

Loan Rates Will Increase

Student Loan Money Will Be Less Available

Student Won't Find Summer Job

Schools Will Raise Tuition

Income Will Decrease Due to Job Loss*

Scholarships/Grants Less Available**

FundsWill Deplete Before College Completion±

Life Insurance Insufficient for College Should Parent Die±

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

20%

17%

29%

18%

10%

32%

21%

31%

22%

22%

18%

35%

23%

25%

33%

38%

31%

27%

49%

33%

34%

22%

22%

28%

28%

17%

44%

25%

31%

22%

21%

30%

31%

14%

36%

23%

34%

13%

13%

25%

21%

10%

28%

17%

23%

12%

14%

2013 2012 2011 2010 2009 2008

Funds Will Deplete Before College Completion

Driving Uncertainty into Opportunity

High Levels of Confidence that Student will Achieve Expected Degree

Driving Uncertainty into Opportunity

Cost-Consciousness

Driving Uncertainty into Opportunity

Families Work at Containing College Costs• Spending has leveled off• Families continue to eliminate certain colleges

due to cost– 79% attend college in state

• 82% of families—the highest since the study began—filed the FAFSA

• 96% of families took at least one action to make college more affordable

Driving Uncertainty into Opportunity

Average Amount Spent on College, By Income, Year-Over-Year

For the purposes of this study, low-income families have been defined as those with an annual household income of less than $35,000, middle-income are families with an annual income from $35,000 up to $100,000, and high-income families are those with an annual income of $100,000 or more.

Driving Uncertainty into Opportunity

Average Amount Spent on College, By School Type, Year-Over-Year

AY2007-2008 AY 2008-2009 AY2009-2010 AY 2010-2011 AY 2011-2012 AY 2012-2013 $-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$17,200 $19,432

$24,097 $21,889 $20,902 $21,178

$30,930

$38,651

$46,208

$41,545

$34,532

$39,434

$16,640 $17,630

$21,747

$18,719 $20,518 $19,796

$6,510 $7,661 $9,989

$11,963 $10,053 $10,668

Total4-yr private4-yr public2-yr public

Driving Uncertainty into Opportunity

Cumulative Elimination of Colleges Based on Cost, Year-Over-Year

Driving Uncertainty into Opportunity

Completion of FAFSA by Grade Level, Year-Over-Year

Total Freshman Sophomore Junior Senior0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

74%65%

74%

82%78%76% 75% 76% 73% 75%72%

80%74% 71%

61%

80%

91%

77%83%

72%

81% 83% 78%

88%81%82% 86% 82% 80% 78%

2008 2009 2010 2011 2012 2013

Driving Uncertainty into Opportunity

Affordable Actions

Military

Transfer to Less Expensive School*

Part Time

Changed Majors

Parent Work More

Early Loan Payments

Accelerate

Add Roommate**

Tax Credits/ Deduc.

Student Work More

Parent Reduced Spending

Living At Home

Student Reduced Spending

0% 10% 20% 30% 40% 50% 60% 70%

4%

13%

15%

19%

20%

22%

27%

35%

41%

47%

48%

57%

60%

**Among students not living at home*Among non-freshmen

Driving Uncertainty into Opportunity

Differences in Affordable Actions Taken by School Type

Live at home Roommate Transfer Part time Accelerate Change major0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

41%

32%

7%10%

23%

14%

48%

34%

10% 12%

24%

16%

83%

47%

23% 25%

34%

26%

4-yr private 4-yr public 2-yr public

Driving Uncertainty into Opportunity

Funding Sources and Share

Driving Uncertainty into Opportunity

Trends in Funding

• Parent out-of-pocket contributions pay a smaller share– More families took advantage of dedicated college

plan savings

• Grants and scholarships are filling the void left by parents

• Borrowing share has stabilized

Driving Uncertainty into Opportunity

How the Typical Family Pays for College, Funding Source Share

Driving Uncertainty into Opportunity

How the Typical Family Pays for College, Year-Over-Year

Driving Uncertainty into Opportunity

How the Typical Family Pays for College, by School Type

2-yr public 4-yr public 4-yr private $-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$3,572 $4,499

$14,440

$363 $1,345

$1,466

$1,754 $2,651

$2,408

$2,937

$6,326

$8,502

$469

$1,183

$5,203

$1,573

$3,792

$7,415 Student Borrowing

Parent Borrowing

Parent In-come & Sav-ings

Student In-come & Sav-ings

Relatives & Friends

Grants & Scholarships

$19,796

$39,434

2-yr public 4-yr public 4-yr private

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

33%23%

37%

3%

7%

4%

16%

13%

6%

28%

32% 22%

4%6%

13%

15%19% 19%

Driving Uncertainty into Opportunity

Percentage of Families Using Each Source Type, Year-Over-Year

Parent P

ersonal

Contributions

Grants/

Scholar

ships

Studen

t Pers

onal Contri

butions

Studen

t Borro

wing

Parent B

orrowing

Relatives

/ Frie

nds0%

10%

20%

30%

40%

50%

60%

70%

80%

59%

51%

42%

29%

15% 17%

64%

55%

45%

36%

18% 16%

66% 67%

50%

34%

13%19%

58% 61%

50%

36%

13% 16%

60%65%

51%

32%

12%18%

2008-09 2009-10 2010-11 2011-12 2012-13

Driving Uncertainty into Opportunity

Use of Grants and Scholarships, by School Type

2-yr public 4-yr public 4-yr private0%

10%

20%

30%

40%

50%

60%

70%

48%

40%

52%

26%

38%

64%

Grants Scholarships

Perc

ent u

sing

sour

ce

2-yr public 4-yr public 4-yr private $-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$3,766

$5,696

$11,786

$5,450 $5,903

$13,709

Grants Scholarships

Aver

age

amou

nt u

sed

amon

g st

uden

ts w

ith so

urce

Driving Uncertainty into Opportunity

Student Use of Borrowed Funds, by Grade Level, Year-Over-Year

Freshman Sophomore Junior Senior 5th Yr+ Total

-10%

0%

10%

20%

30%

40%

50%

60%

25%

31%

38%

46%41%

34%31%

28%

48%

41%44%

36%33%

21%

31%

45%

60%

32%201120122013

Driving Uncertainty into Opportunity

Proportion Using Federal and Private Student Loans

Driving Uncertainty into Opportunity

Planning to Pay for College

Driving Uncertainty into Opportunity

Planning for College Costs is a Challenge

• Most families don’t have a plan for paying for all years of college when they start

• Amount paid for college and future earnings are not aligned proportionately by major course of study

• Parent savings become scarcer as students advance through college

• Families aren’t prepared for the ‘unexpected’

Driving Uncertainty into Opportunity

Had a Plan to Pay for All Years Prior to Enrolling

2010 2011 2012 20130%

10%

20%

30%

40%

50%

60%

70%

39%

45%

39% 43%

24%26%

30%33%34%

43%

47% 46%

62% 62%

57%

52%

Total Low Income Middle Income High Income

Driving Uncertainty into Opportunity

Comparing Average Cost of College and Starting Salary by Major, Overlaid with Proportion of

College Costs Paid by Borrowing

Visual and Per-forming Arts

Education Health Social sciences Math/Science Liberal Arts Business Engineering$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$19,849 $17,701 $17,701

$28,776

$20,420 $23,029

$18,576

$25,639

$33,800

$40,668

$49,196

$36,988 $42,471 $43,100

$53,900

$62,655

Average Cost Average Starting Salary

30%

13%

Driving Uncertainty into Opportunity

Parent Personal Contributions by Grade Level

Income College savings/529 Retirement savings Other savings/investments0%

10%

20%

30%

40%

50%

60%55%

21%

6%

11%

53%

19%

3%

10%

47%

15%

3%

9%

50%

11%

4%

13%

Freshman Sophomore Junior Senior

Driving Uncertainty into Opportunity

Role of Savings

• 17% of families used parent savings from dedicated college savings plans/529s

• 5% used retirement savings• 11% used parent savings from

other types of investments• 27% of families used student

savings

Saving for Col-

lege50%

Not Sav-ing for College

50%

Parents of Children Under 18 Sav-ing for College

Driving Uncertainty into Opportunity

Planning Resources Used

Scholarship Search Websites

High School Counselor

Financial Aid Eligibility Calculator

College Cost Calculator

Loan Payment Calculator

College Net Price Calculator

Savings Planner

No Resources Used

0% 10% 20% 30% 40% 50% 60% 70%

60%

56%

55%

23%

22%

14%

13%

11%

Driving Uncertainty into Opportunity

Unexpected Expenses

• 2 in five families report unexpected expenses– Most prevalent: books, supplies and equipment

• More than half of families have no financial contingency plan

• Confidence in time to degree not aligned with national averages: 92% enrolled in BA program believe they will achieve it in 5 years or fewer (vs. just over 61%)

Driving Uncertainty into Opportunity

Driving Uncertainty into Opportunity

The information contained in this presentation is not comprehensive, is

subject to constant change, and therefore should serve only as general,

background information for further investigation and study related to

the subject matter and the specific factual circumstances being

considered or evaluated. Nothing in this presentation constitutes or is

designed to constitute legal advice.