National study from Sallie Mae, Gallup shows families digging deeper to invest in rising cost of college

Category:

Tuesday, August 10, 2010 8:08 am EDT

Dateline:

RESTON, Va.

Public Company Information:

NASDAQ:
SLM
"Americans indicate that college is more important than ever. In today’s economy a degree can halve the unemployment rate of those without a college education"

Even in a continued period of economic uncertainty, families are digging deeper to invest in what they value: a college degree, according to a new national study of college students and their parents conducted by Sallie Mae and Gallup. Most are taking practical steps to reduce costs, and more than two-thirds of parents and students strongly agree that a college degree is more important now than ever.

“In Gallup’s Daily Tracking, we see families reporting dramatic decreases in discretionary spending since the onset of the recession; however, this study clearly shows families are stretching themselves to pay for higher education,” said Dr. Bill Diggins, lead researcher, Gallup. “While they’re worried about the rising cost of tuition in the future and becoming more cost conscious, Americans continue to see college as an essential investment.”

As the lagging economy continues into its third year, the study indicates that both parents and students opened their wallets wider, tapped more scholarships and grants, and borrowed more to pay for the escalating total cost of college, which survey respondents reported increased by 17 percent from the previous year. Contributions from parents rose the most, driven by an increase in the use of 529 college-savings plans. In fact, 15 percent of families used money from a college-savings plan—up from 11 percent last year and 9 percent two years ago.

Conducted in March through May 2010, the study shows that parents paid nearly half (47%) the share of college costs for the 2009-2010 academic year, and students paid roughly one quarter through income, savings, and loans. In the typical family, student borrowing increased by $675 from the previous year. Federal loans were used by 28 percent of students and private loans were used by 13 percent of students. Private loan borrowers had a 15 percent higher cost of attendance than other student borrowers and 93 percent completed a FAFSA, the federal financial aid application.

To make college more affordable, most families reduced spending (73%) or increased work hours or earnings (48%), but a remarkable 43 percent of families report that their student lived at home. Another 43 percent indicated they claimed education tax credits or student loan interest deductions on their tax forms, and 23 percent pay early on their student loans to help lower costs. However, only a quarter of families (26%) strongly agreed that they had a plan to pay for the desired college degree before enrolling.

“Americans indicate that college is more important than ever. In today’s economy a degree can halve the unemployment rate of those without a college education,” said Albert L. Lord, CEO, Sallie Mae. “There is no one way to pay for college, but those who plan and save are better positioned when the bill is due. Sallie Mae is here to help Americans access affordable options to make their education investment.”

The study found no improvement in the percent of families filling out the FAFSA: approximately one in four families (28%) did not submit the financial aid form. Half of the families who did not complete it either did not think that they would qualify for federal aid or were unaware of the FAFSA.

Parental support is not limited to the college years. Roughly half (51%) of families said parents would make temporary payments on student loans in their children’s name should they experience financial difficulty after graduation.

How America Pays for College is the third annual study of college students and parents. The full report of the nationally representative survey of 1,624 undergraduates, ages 18-24, and parents is available at www.SallieMae.com/howAmericapays.

Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Celebrating 40 years of making a difference, Sallie Mae continues to turn education dreams into reality for American families, today serving 25 million customers. With products and services that include 529 college savings plans, Upromise rewards, scholarship search and planning tools, education loans, insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

Gallup has studied human nature and behavior for more than 70 years. Gallup’s reputation for delivering relevant, timely, and visionary research on what people around the world think and feel is the cornerstone of the organization. Gallup employs many of the world's leading scientists in management, economics, psychology, and sociology, and our consultants assist leaders in identifying and monitoring behavioral economic indicators worldwide. Gallup consultants also help organizations boost organic growth by increasing customer engagement and maximizing employee productivity through measurement tools, coursework, and strategic advisory services. Gallup's 2,000 professionals deliver services at client organizations, through the Web, at Gallup University's campuses, and in 40 offices around the world. For more information go to www.gallup.com.

Contact:

Patricia Nash Christel (302) 283-4076
Eric Nielsen (202) 715-3030 (Gallup)