A new study finds parents are footing a smaller portion of the college tuition bill as families become more cost-conscious. The burden is shifting to the student, who now has to depend on money from other sources to pay for rising college costs—and many are also finding "free money" to pay for a large chunk of the tab.
According to a report released Tuesday by Sallie Mae, scholarships and grants have trumped parental contributions as the No. 1 source of paying for college for the first time in four years.
Scholarships and grants paid for about 30 percent of college costs in the 2012-2013 academic year, up from 25 percent in 2008-2009, the Sallie Mae study found. Meanwhile, contributions from parental income and savings dropped from 36 percent four years ago to 27 percent today. Student borrowing has risen 4 percent in that time and now covers 18 percent of college costs.
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"Student borrowing has leveled off in the past few years, but parent income and savings has come down considerably," said Sarah Ducich, senior vice president for public policy at Sallie Mae. Parents are "just as willing to stretch to pay for college," she says, "but they don't have the money they had prerecession."
Meanwhile, as parental contributions have declined, "college and universities are stepping up," Ducich said. That may also be another factor that has changed who pays for education costs. "The majority of students getting scholarships are getting them from universities and colleges," she says.
Eric Charity got a free ride from Penn State University and he didn't hesitate to take it—even though the school was not his first choice. Charity had dreamed of following in the footsteps of his older brother and cousins, who graduated from Princeton University. But he changed his mind after being offered a full academic scholarship to Penn State.
"When it was my time, my parents really needed some help financially for me to attend school," he says. If he had gone to Princeton or the University of Virginia, his other top choice, Charity says he "would have been in severe debt."
With the university scholarship as well as private scholarship from a local nonprofit, Charity paid for tuition, room and board, fees and other expenses (including a new computer and school supplies) for four years with scholarships. He graduated from Penn State in 2010 and earlier this year got his law degree from William & Mary, which he chose in large part because of cost.
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Students and their families are increasingly following Charity's path. "We've seen parents bring their spending down. They're eliminating schools more frequently as they go through the [college selection] process, so that by the end about two-thirds of families have eliminated a school due to cost," Ducich said, referring to Sallie Mae's new report on "How America Pays for College."
As incoming students and their families see recent graduates facing a tough job market, they are also more reticent to spend or borrow great sums of money for college, financial advisors say.
"If your college-educated kids make less money, then you spend less money on their degree," said Ivory Johnson, founder of Delancey Wealth Management. "If you hear stories about degreed friends who are burdened by student loans, then you borrow less money."
Using that lens, more families are choosing colleges and universities based on cost. It's an encouraging trend, Ducich says. "Making the choice that's affordable not just for the first year but the fourth year as well is so important."
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