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The Future of Financing College

america pays for college
Sallie Mae Annual Report

In July, 2013, Sallie Mae released its annual report, “How America Pays for College.” Ipsos Public Affairs conducted the survey, which focuses on undergraduate students, ages 18 to 24 years old. Half of the survey population were enrolled students; the other half included parents of enrolled undergraduate students. The most recent edition of the report examines how Americans paid for college for the 2012-13 academic year, most likely relevant only for “traditional” students (18-24 year olds attending college full-time after high school graduation).A report that focuses on non-traditional college students’ funding of college would be of interest as well.

Overall, families are giving significantly more consideration to how they will pay for college and the cost versus “value” of the college degree. Since 2010, when families paid a peak of $24,097, the amount families spend on college has decreased. For the 2012-13 academic year, families spent only about $21,178 on college. This is comparable to the amount paid during the 2011-12 academic year, indicating that the decrease in college spending leveled out a bit from its reduction in 2011-12.

Some of the findings of the report are interesting, particularly how family decisions are trending as they adjust to the new post-recession economic reality.

Socioeconomic Trends
Even though high- and low-income families decreased spending over the last several years, college spending for middle-income families rebounded for the most recent academic year to an average of $22,197, a 10 percent increase over 2012. Low-income families had the most dramatic decrease in college spending over the last several years averaging just over $18,000—a 9 percent decline since 2011.

Students Shoulder More
Since the 2009-10 academic year, parental contributions decreased significantly while a larger portion of the total financial burden shifted to the student and other funding sources. Student borrowing has increased by about 4 percent since the 2009-10 academic year.

Grants and Scholarships Increase
The most significant increase in spending is in the use of grants and scholarships. Grants and scholarships comprise 30 percent of the total spent today. The report’s authors note, “The post-recession reality appears to be that grants and scholarships have replaced parent income and savings as the major contributor to paying for college.” Colleges and universities are addressing this trend by increasing the number of scholarships and the dollar amount. Not surprisingly, middle- and low-income students relied more heavily on grants and scholarships compared to high-income families.

529 Plans Increase in Popularity
Families are turning to 529 plans for tax-reduced alternatives to save for and fund higher education for their children. “More families, 17 percent, used 529 college savings plans to pay for college in 2013 than in any other year,” according to the report.

The largest increase in the use of these plans is seen among high-income families with a jump from 16 percent in 2012 to 26 percent in 2013. Although new trends in financing higher education continue to grow, borrowing still represents a significant portion of the financial package for families paying for college and remains fairly consistent over the last several years.

Families Seek New Ways to Pay for College
Many families reported taking proactive actions to help fund college educations for their children. For example, nearly half of students indicated that they increased their work hours to build their own incomes and supplement other funding sources to pay for college. Twenty-seven percent of students chose an accelerated program to decrease the total time spent in college to lower the overall financial burden of the degree. The survey finds that more students are living at home or with relatives to further decrease the total cost of attending.

The level of worry associated with paying for college is less than it has been in previous years. The authors write, “While most families expressed concerns about paying for college, in general, these concerns were not as strongly felt in 2013 as in previous years.”

At the “peak of the recession” in 2010, half of the parents responding to the survey indicated “they were extremely worried” about colleges raising tuitions, but in the most recent report, only 28 percent indicated the same feelings. Fewer parents indicated worries related to other financial circumstances like devaluation of their homes or loss of a job.

The above indicators point to another finding of the survey: “85 percent of families felt strongly that college was an investment in their child’s future in 2013, the highest proportion seen in the last five years.” While there has been an 8 percent drop since 2010 in parents’ belief that the college experience is valuable for intellectual or social purposes, more than half responded that they would borrow money before deciding not to go to college due to excessive cost.

It’s not surprising that families continue to find ways to send their children to college. Parents and students are scrutinizing college costs more carefully, and many are eliminating schools early based on the cost to attend. Parents and students seem to maintain their inherent faith in the higher educational system and its benefits, but they are becoming more astute consumers. In our market economy, where people vote with their wallets, these trends could drive significant change in the way that higher education leaders price, market, and deliver learning to students.






Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.


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