Families Rely More on Income, Savings for College

More Income, Savings Are Used to Cover Costs, Survey Finds.

American families are relying more on their income and savings—and less on loans—to pay for college, according to an annual study by education lender Sallie Mae, formally known as SLM Corp.

In the 2013-14 academic year just ended, the typical family paid 22% of total college costs by borrowing, down from 27% in each of the preceding two school years.

These families paid 42% of college costs by using income or savings from the parents and/or student, vs. 38% the year before and 40% in 2011-12, according to the Sallie Mae study, conducted by market-research company Ipsos Public Affairs.

For low-income families, a big increase in grants and scholarships made the reduced borrowing possible, said Sarah Ducich, a co-author of the report. For higher-income families, the continued strong stock market enabled them to take out more dollars from investment accounts.

The average cost of college, $20,882, was relatively stable for the third year in a row after peaking at $24,097 in the 2009-10 year. These figures don’t take into account any grants, scholarships or other nonloan aid students may receive.

Cost-conscious families “are not going to write a blank check” for college, Ms. Ducich said. “They are making a lot of decisions to control the cost.”

For one thing, more students attended a two-year public college, and many such students live at home. The 34% of students using two-year public schools was the highest in the seven years the study has been conducted.

“You can save an enormous amount of money” at a two-year school, said Christopher Russo, 22, of Bridgewater, N.J., who received an associate degree in May from nearby Raritan Valley Community College.

Because of medical and financial issues, his family was unable to contribute to college costs. Still, Mr. Russo is debt-free, with summer earnings combined with grants and scholarships having covered Raritan Valley’s full cost—$4,600 in 2013-14 for local-county residents taking 15 credits a semester.

Mr. Russo will incur a limited amount of debt when he continues his education this fall at Rutgers, the State University of New Jersey. While some of his friends attending private colleges will end up with huge debt burdens, he said, “I’ll be out of debt incredibly fast,” probably a few years after graduation, thanks to his in-state tuition at Rutgers and spending the first two years at a community college.

Michael J. McDonough, president of Raritan Valley Community College, said that as families have become more cost-conscious, “community colleges have become more aggressive in marketing [their] affordability.”

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