Amid growing recognition that easy college loans all too often turn into a lifetime debt burden, the tide may be turning. Families aren’t borrowing as quite as much to pay for their kids’ college education, reports the WSJ:
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.
Hidden in the good news for families is some not-so-good news for colleges, however:
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.
Many colleges are upping the numbers of grants and scholarships because enrollment is in decline. For private schools, that means the sticker price is often nothing like the price that students actually pay, and the schools earn much less from tuition than you might assume. Meanwhile, public schools will soon have to rely more on tuition than on state funding.
Even with all those sweeteners and discounts, students still aren’t flocking to pricy schools as readily as before (though admittedly students may not realize just how deeply the schools cut the cost):
Meantime, among the 22% of families with students at four-year private colleges, some appear to have sought lower-priced schools, Ms. Ducich said. While the average costs for two-year and four-year public schools in 2013-14 rose 3.2% and 6.4%, respectively, from the previous school year, the average expense for four-year private schools fell 11.6% from $39,434 the prior year. All figures are before reductions for aid.
And who among us thinks it’s the Ivy League that’s getting squeezed? Of course not—it’s almost certainly mid-tier private universities and liberal arts colleges that are seeing their enrollment numbers fall as more students content themselves with cheaper public or private schools.
While it seems that some lower-income families are breathing easier, the same can’t be said of colleges.