Families bearing brunt of college costs, new study says

By Peter Schworm, Globe Staff

Students and families are paying about 85 percent of college costs and nearly half are borrowing money to cover their expenses, a national study has found.

Parents are paying about one-third of the total cost of attendance from income and savings, and are borrowing another 16 percent. Students are contributing one-third, mostly by taking out loans, and friends and relatives chip in 3 percent.

Grants and scholarships, money that does not have to be repaid, accounted for just 15 percent.

The report, "How America Pays for College," is the first study to gather information directly from families on how they are financing college. Conducted by Gallup, it was released today by Sallie Mae, the nation's largest student loan company.

In May, Gallup interviewed more than 1,400 parents and students who attended college this past academic year to survey their approach and attitudes toward higher education costs.

The report showed that college costs are consuming a significant portion of family income. Families earning less than $50,000 annually paid almost $9,000 the last academic year; families earning between $50,000 and $100,000 paid $14,600; families earning more than $100,000 paid an average of nearly $20,000 a year.

As expected, the yearly cost of attendance rose with income, from just over $10,000 for households earning between $35,000 and $50,000 annually, to nearly $21,000 for those earning above $150,000.

At an average of $11,000, higher-income families spent far more from current income and savings than lower earners. High-income families borrowed just $3,000 on average, just $600 more than low-income families.

Students from low-income families received about three times as much in grants and scholarships as high-income students. Students contributed about 10 percent through income and savings.

Almost one-quarter of total higher education funding came from student loans. Middle-income students borrowed the most, at an average of nearly $5,000, which paid for about 30 percent of college costs. Because they attended private colleges at nearly the same rate as high-income students, middle-income students are "reaching more financially to pay for more expensive institutions," the study found.

Only 8 percent of students and 4 percent of parents took out private loans. About 6 percent of parents took out federal loans, but on average borrowed a whopping $10,700. Parents who took out private loans, which have become scarcer and more expensive during the ongoing credit crunch, borrowed nearly $7,000.

A surprisingly small number of parents -- just 3 percent -- took out home equity loans, but those that did relied on them heavily, borrowing more than $10,000 on average, the study said.

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