If you have a college-bound child in your family, you’ve probably spent a good amount of time discussing a plan for financing a most-likely high-cost tuition.
According to a recent survey from student-loan provider College Ave, how students and families pay for college has fluctuated in recent years, with borrowing for college on the rise, and the use of merit aid and personal income and savings falling. In fact, survey results show that since 2019, the use of merit aid and parent’s savings and income has dropped by double digits, while federal student loans rose to the second most-used method, its highest since 2019.
The survey also found college affordability is top of mind for the majority of students (57%). Despite concerns around college costs, students are invested, with most students reporting that a college degree is crucial for their future (81%).
The College Ave survey also looked at the personal financial habits of college students. College students are not immune to inflation, with 61% saying it has negatively impacted their saving and spending habits. “Broke,” “stressful,” and “saving,” were the top three words college students’ associated with their finances, suggesting that even though students may feel stressed about their finances, they still understand the importance of saving.
The bright spot in the survey findings is that while living on a college student’s budget can be difficult, many are starting their adult lives with a wise approach toward finances. The majority of college students (71%) report they have a personal financial goal they are working towards, 60% have a job, and half (50%) keep a personal budget. In addition, 44% report saving in college while 14% also invest.
Responding students also seem to have a strong basic knowledge of student loans, with 79% of those who have student loans understanding that they will pay more back than they borrowed. That said, they are certainly worried about repaying the loans; 69% are concerned the student loan payment may be more than they anticipated and less than half (47%) feel confident in their ability to pay them back.
If you’re a parent in the throes of dealing with college-related finances, College Ave offers the following tip to ease the process:
– Talk money with your child. The majority of students report personal finance education came from their parents (73%). It outranked online research (57%) and school classes (46%). In addition to learning how to do laundry and make meals, help your child learn to set up a budget, pay bills and manage credit before they head off to college.
– Set a realistic (parent) budget. The survey found that in addition to helping pay for college tuition and housing costs, parents also contribute to their child’s phone bill (65%), health insurance (61%), food and groceries (42%), cable and internet bill (35%) and transportation (32%). Look at your own budget and be realistic about which college expenses you can afford and where you may want to ask your child to chip in.
– Make a plan to repay. 61% of students who had student loans and expected to have student loan debt when they graduate did not know or weren’t sure what their student loan bill would be upon graduation. Help your child understand how interest rates work, the total cost of the loan, estimate their monthly payments, and a plan on how they will repay it upon graduation.
– Look at the big picture. While college students ranked the cost of college as their top concern (57%), rounding out the top four were mental health (54%), finding a job after graduation (54%) and grades (53%). Help set your child up for success by encouraging them to reach out to resources and trusted people when they need support.
