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Parents bear the brunt of college bills, study shows

By Helen Huntley, Times Personal Finance Editor
In print: Thursday, August 21, 2008

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Let's hear it for the Bank of Mom and Dad.

No matter how much they hope for scholarships, when it comes time to pay for college, most parents pony up. A new study out Wednesday shows that parents provide 48 percent of the cost of college. Those hoped-for scholarships? They're good for just 15 percent.

"I'm on a $525-a-month payment plan" for housing, said Donna Lopez of Tampa, whose 19-year-old daughter, Sarah Ortiz, is heading back to Florida State University on Friday. Sarah, a sophomore biology major, has a Bright Futures scholarship, but "it doesn't cover everything," Lopez said. She works two jobs to help make up the difference.

Gallup and student-lending giant Sallie Mae say their new survey shows that two thirds of parental support comes from parents' current income and savings, with the rest from loans. Students pay a third of the total cost, but most of that money is borrowed.

The students and parents reported that the average cost of college last school year was $14,628, but the price tag ranged from $5,263 at two-year public colleges to $27,679 at four-year private colleges. Federal loans were the most common way to borrow, used by 28 percent of the students, who borrowed an average of $5,075, and 6 percent of the parents, who borrowed an average of $10,701.

Among the report's conclusions: Parents and students aren't giving careful enough consideration to how they are going to pay for college.

"Not enough are using available college savings tools, too many are borrowing without considering how they will repay, and too many are not completing federal financial aid forms," said Sallie Mae president C.E. Andrews.

Of particular concern: A fourth of families with incomes between $35,000 and $50,000 said they did not fill out a federal student aid application, which is a prerequisite for most need-based grants and loans.

"Those are the people most likely to be leaving free money on the table," said Tom Joyce, senior vice president of Sallie Mae.

Only 3 percent of families said they borrowed from home equity to pay for college. Among those who did, the average was $10,853, and most said they planned to do it again in the coming school year. That may be difficult, given declining home values and higher credit standards. Another 3 percent said they used credit cards to help pay for college.

Sallie Mae and Gallup said they plan to repeat the study annually to measure changes in the way Americans pay for college and to help educate students and parents.

"We want to try to get families away from the semester-by-semester fire drill as to how they are going to pay," Joyce said. "Families need to be much better aware of how much education costs."

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.