If you're looking at current college students and wondering how they and their families are paying for college, trust us — you're definitely not alone.
With the cost of higher education rising at exponential rates, the tuition prices students face now are, at best, overwhelming. No one would blame you if thinking about paying for college made you feel like climbing back into bed and pulling the covers over your head.
But the fact is, lots of families are figuring it out through a combination of current income, savings, gift aid, and other financial aid. A recent report from Sallie Mae details exactly how families in the United States are paying for college.
Seeing how other families are managing the financial load can help your family develop your own plan for covering the costs of one (or more) college educations while taking into account your specific resources.
The average cost of a college degree
The hard truth is that for many, college is an expensive proposition. The average amount paid for college in 2020-2021 (the last school year we have data for) was $26,373.
Scholarships and grants, along with parent income and savings, make up the two largest funding sources for college. But more than eight out of ten families rely on financial aid to pay for at least some portion of college.
How much families pay and how much they borrow
While the large majority of families are using financial aid, that aid doesn't make up the biggest share of college funding. During the 2020-2021 academic year, family income and savings covered about 53% of college costs — that includes income and savings from both parents and students.
Of course, whenever possible, families relied on the least-expensive resource for paying college tuition — scholarships, grants, and gifts. These covered approximately 25% of college costs in the 2020-2021 year; gifts from relatives and friends covered another 2%.
That leaves 20% of the cost covered by borrowed money.
How much students (and parents) pay and how much they borrow
Families borrowed 20% of the cost of college per year. In 2020-2021, that means parents borrowed $11,394 and students borrowed $8,775.
Parents paid $11,793 from income and savings (including 529 plans), with students contributing another $2,210 (incuding work-study funds they earned).
No surprise that students aren't able to provide as much of the money for college while they're still in school. But they aren't off the hook for contributions. They borrow more than their parents do. On average in 2020-2021, students borrowed $2,794 from all sources, while parents' borrowed $2,366 including the use of traditional loans, retirement account loans, and credit cards.
How far does gift aid go?
With the costs of college rising, receiving a scholarship or a grant for any portion of tuition is a win. But for most students, gift aid doesn't come close to covering the cost of their college education. Scholarships and grants made up 25% of college costs in 2020-2021.
If your student has their heart set on an expensive out-of-state school and plans to pay for it with scholarships, you may want to share these numbers and have a conversation about whether those expectations are realistic. Scholarships can be had for students of all kinds — you don't need a GPA above 4.0 to qualify for many of them. But if your kid expects scholarships to cover a hefty part of their college expenses, make sure they understand they'll have to hustle to research and apply for a lot of them. (Spoiler: We can help you find a wide variety of scholarships that can help make that task easier.)
What if you need student loans?
Obviously, student loans are a necessity for many college students. We advise everyone to fill out the FAFSA and max out any federal student loan dollars that are offered before turning to private student loans. According to the report, in 2020-2021 only 68% of families submitted a FAFSA, many saying they didn't bother because they didn't think they'd qualify. In fact, most families qualify for some kind of aid — there's no way to know what/how much aid you could qualify for if you don't even try.
Regardless, most families, no matter how diligent will need to rely on at least some student loans to help pay for college. If/when you find yourself shopping for a private student lown. make sure you're working with a reputable lender and shop around for the best interest rate.
And don't forget: Scholarships are still the least expensive way to pay for school. Send your kid to our $2,000 college scholarship application right away. Parents can apply too!