How AmericA PAys for college 2012 sallie mae’s National study of college students and Parents conducted by ipsos Public Affairs return to table of contents ABOUT SALLIE MAE® Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Whether college is a long way off or just around the corner, Sallie Mae turns education dreams into reality for its 25 million customers. With products and services that include college savings programs, scholarship search tools, education loans, insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. More information is available at www.SallieMae.com. Sallie Mae 300 Continental Drive Newark, DE 19713 ABOUT IPSOS PUBLIC AFFAIRS® Ipsos is an independent market research company controlled and managed by research professionals. Founded in France in 1975, Ipsos has grown into a worldwide research group with a strong presence in all key markets. In October 2011, Ipsos completed the acquisition of Synovate. The combination forms the world’s third-largest market research company. With offices in 84 countries, Ipsos delivers insightful expertise across six research specializations: advertising, customer loyalty, marketing, media, public affairs research, and survey management. Ipsos researchers assess market potential and interpret market trends. They develop and build brands. They help clients build long-term relationships with their customers. They test advertising and study audience responses to various media and they measure public opinion around the globe. Ipsos has been listed on the Paris Stock Exchange since 1999 and generated global revenues of €1,363 billion (1.897 billion USD) in 2011. Visit www.ipsos-na.com to learn more about Ipsos offerings and capabilities. Ipsos Public Affairs 1146 19th Street NW, Suite 200 Washington, DC 20036 Access a related infographic and other information about this study at www.SallieMae.com/HowAmericaPays. © 2012 Sallie Mae, Inc. All rights reserved. The Sallie Mae logo and Sallie Mae are registered service marks of Sallie Mae, Inc. SLM Corporation and its subsidiaries, including Sallie Mae, Inc., are not sponsored by or agencies of the United States. Other logos are trademarks or service marks of their respective owners. SMSM MKT5329 0712 tAble of coNteNts toc 1: ABOUT THIS STUdy __________________________________________________________ 5 2: OvERvIEw OF FIndIngS ______________________________________________________ 6 3: dISCUSSIOn OF FIndIngS _____________________________________________________ 8 College spending declines for the second year running ..........................................................................................................................................................................................8 American parents respond to a difficult economy .................................................................................................................................................................................................10 Families taking more measures to reduce the cost of college ..............................................................................................................................................................................14 Families are collectively responsible for meeting the costs of their college choices .........................................................................................................................................16 4: THE ROLE OF vARIOUS FUndIng SOURCES ___________________________________________ 18 5: STUdEnTS wHO BORROw PRIvATE EdUCATIOn LOAnS ____________________________________ 21 6: COLLEgE STUdEnTS And CREdIT CARdS ____________________________________________ 23 7: dATA TABLES ____________________________________________________________ 25 8: TECHnICAL nOTES _________________________________________________________ 50 FIgURES __________________________________________________________________ Figure 1: Average Amount Paid for College, year-over-year, by Income Level .......................................................................................................................................................6 Figure 2: How the Typical Family Pays for College: Percent of Total Cost of Attendance Paid from Each Source 2011-2012 ...............................................................................7 Figure 3: How the Typical Family Pays for College, year-over-year ........................................................................................................................................................................8 Figure 4: Student Use of Federal Student Loans, year-over-year ............................................................................................................................................................................9 Figure 5: How the Typical Low-Income Family Pays for College, year-over-year.................................................................................................................................................10 Figure 6: How the Typical Middle-Income Family Pays for College, year-over-year ............................................................................................................................................11 Figure 7: How the Typical High-Income Family Pays for College, year-over-year ................................................................................................................................................11 Figure 8: Parents’ Attitudes toward College, Rated Strongly Agree, year-over-year ............................................................................................................................................12 Figure 9: Students’ Attitudes toward College, Rated Strongly Agree, year-over-year...........................................................................................................................................12 Figure 10: Parents’ Reasons for Attending College, Rated Strongly Agree, year-over-year .................................................................................................................................13 Figure 11: Students’ Reasons for Attending College, Rated Strongly Agree, year-over-year ...............................................................................................................................13 Figure 12: Cumulative Elimination of Schools Based on Cost, year-over-year ......................................................................................................................................................14 Figure 13: Percent of Families Filing the FAFSA, by Income, year-over-year ........................................................................................................................................................15 Figure 14: College Selection decision Maker ...........................................................................................................................................................................................................16 Figure 15: Paying for College decision Maker .........................................................................................................................................................................................................16 Figure 16: Family Had a Plan for Paying for All years of College, by Income, year-over-year .............................................................................................................................17 Figure 17: Student Loan Borrowing by Loan Type ....................................................................................................................................................................................................21 Figure 18: Student Private Education Loan Borrowing by School Type ..................................................................................................................................................................22 Figure 19: Credit Card Usage by grade Level, year-over-year ...............................................................................................................................................................................23 Figure 20: Average Outstanding Credit Card Balances ............................................................................................................................................................................................24 tAble of coNteNts ... toc cont TABLES ___________________________________________________________________ Table 1a: The Role of various non-borrowed Funding Sources Used to Pay for College, Frequency of Sources and Average Amounts Used ..................................................18 Table 1b: The Role of various Borrowed Funding Sources Used to Pay for College, Frequency of Sources and Average Amounts Used ..........................................................19 Table 2: Average grant and Scholarship Amounts ...................................................................................................................................................................................................25 Table 3: Scholarship Source ......................................................................................................................................................................................................................................26 Table 4: Use of Student Income and Savings ...........................................................................................................................................................................................................26 Table 5: Use of Parent Income and Savings .............................................................................................................................................................................................................27 Table 6: Use of Payment Plan ....................................................................................................................................................................................................................................27 Table 7: Use of Funds from Relatives and Friends ...................................................................................................................................................................................................28 Table 8: who Contributed Borrowed Funds ..............................................................................................................................................................................................................29 Table 9: Use of Parent Borrowed Funds ....................................................................................................................................................................................................................30 Table 10: Use of Student Borrowed Funds ................................................................................................................................................................................................................30 Table 11a: Composite of College Funding Sources: Average value Contributed from Each Source, by Income Level .........................................................................................31 Table 11b: Composite of College Funding Sources: Average value Contributed from Each Source, by Race or Ethnicity ...................................................................................31 Table 11c: Composite of College Funding Sources: Average value Contributed from Each Source, by School Type ...........................................................................................32 Table 11d: Composite of College Funding Sources: Average value Contributed from Each Source, by Family Borrowing Status ......................................................................32 Table 12a: Composite of College Funding Sources: Average Percent of Total Cost of Attendance Met by Each Source, by Income Level ..........................................................33 Table 12b: Composite of College Funding Sources: Average Percent of Total Cost of Attendance Met by Each Source, by Race or Ethnicity ....................................................33 Table 12c: Composite of College Funding Sources: Average Percent of Total Cost of Attendance Met by Each Source, by School Type ............................................................34 Table 12d: Composite of College Funding Sources: Average Percent of Total Cost of Attendance Met by Each Source, by Family Borrowing Status .......................................34 Table 13: Completed FAFSA Application ....................................................................................................................................................................................................................35 Table 14: FAFSA Application Ease of Use ..................................................................................................................................................................................................................35 Table 15: Reasons did not Complete FAFSA Application ..........................................................................................................................................................................................35 Table 16: Total Cost of Attendance.............................................................................................................................................................................................................................36 Table 17: Enrollment by Type of School ....................................................................................................................................................................................................................36 Table 18: Enrollment by Home State .........................................................................................................................................................................................................................37 Table 19: Student Course of Study ............................................................................................................................................................................................................................37 Table 20: Elimination of Colleges Based on Cost ......................................................................................................................................................................................................38 Table 21: More Affordable Actions ............................................................................................................................................................................................................................39 Table 22: Attitudes toward College, Rated Strongly Agree .......................................................................................................................................................................................40 Table 23: Attitudes toward College, Scale 1-5..........................................................................................................................................................................................................40 Table 24: Reasons for Continuing Education, Rated Strongly Agree .......................................................................................................................................................................41 Table 25: Reasons for Continuing Education, Scale 1-5 ..........................................................................................................................................................................................41 Table 26: Parent Economic Concerns, Rated Extremely worried ............................................................................................................................................................................42 Table 27: Parent Economic Concerns, Scale 1-5 .....................................................................................................................................................................................................42 Table 28: Use of Tuition Insurance ............................................................................................................................................................................................................................43 Table 29: College Selection decision-Making ..........................................................................................................................................................................................................44 Table 30: Paying for College decision-Making ........................................................................................................................................................................................................44 Table 31: Financial Plan for College ..........................................................................................................................................................................................................................44 Table 32: Parent and Child Responsibility for Paying for College ............................................................................................................................................................................45 Table 33: Responsibility for Repaying Parent Loans ................................................................................................................................................................................................45 Table 34: Responsibility for Repaying Student Loans ..............................................................................................................................................................................................46 Table 35: Student Money Management Ability ..........................................................................................................................................................................................................46 Table 36: debit Card and Credit Card Ownership .....................................................................................................................................................................................................47 Table 37: Student Credit Card Holder ........................................................................................................................................................................................................................48 Table 38: Student Outstanding Credit Card Balance .................................................................................................................................................................................................49 Table 39: Parent Monthly Payment on Student Credit Card .....................................................................................................................................................................................49 HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 1: About tHis study Sallie Mae has conducted How America Pays for How America Pays for College focuses on College annually since 2008, providing information undergraduate students ages 18 to 24. Each survey about the resources American families invest in an year, half of the survey population is enrolled 18 to undergraduate college education. This study focuses 24 year-old undergraduates and half is the parents particularly on the planning and payment behaviors in a of enrolled 18 to 24 year-old undergraduates. given academic year. For details on methodology, please see the Technical Notes section. Unlike other studies which focus solely on education- specific sources of funding, this study assesses all of Questions about paying for college specifically reference the resources families use, including non-education- the July 1–June 30 academic year ending in the year specific sources of saving and borrowing such as referenced. Thus the survey conducted in 2012 covers retirement funds or credit cards. This comprehensive amounts paid in academic year 2011-2012; 2011 point of view illustrates the shared responsibility covers academic year 2010-2011 and so on. For year- Americans have in paying for college, both within and over-year comparison purposes, the report references outside of the families with a student attending college. the survey year (e.g., 2012, 2011, 2010, 2009, and 2008). How America Pays for College depicts the average amounts and proportion of total costs paid from each Interviews take place in the spring, during the second funding source that a “typical” family pays for college. half of the academic year. The timing of the interviews The “typical” family is a composite representation allows families to report actual amounts that they used produced mathematically from the results of the survey (vs. projected amounts) to meet the cost of college questions about how and how much respondents paid that year. for college spread across all families. As the nation’s No. 1 financial services company Now in its fifth year, the study allows tracking over time specializing in education, Sallie Mae is committed to of changes in funding choices and amounts paid. presenting findings from this study on a regular basis. | 5 | return to table of contents HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 2: overview of fiNdiNgs Sallie Mae’s 2012 How America Pays for College study, conducted by Ipsos Public Affairs, demonstrates that the dramatic post-recession decline in American families’ spending on college first seen in 2011 has continued in 2012. The nationally representative survey of 1,600 dependent undergraduate college students and parents reveals that the average amount families spent on college declined by 5 percent in 2012. American families reported taking more cost- saving measures and more families report making their college decisions based on the cost they can afford to pay. FIgURE 1 — AvERAgE AMOUnT PAId FOR COLLEgE,1 yEAR-OvER-yEAR, By InCOME LEvEL $35,000 $31,245 $30,000 $25,760 $25,617 $25,000 $23,817 $24,097 $21,040 $21,889 $19,435 $22,628 $21,347 $20,902 $20,000 $20,065 $17,200 $16,910 $17,383 $19,888 $19,159 $15,000 $16,955 $17,404 $15,130 $10,000 $5,000 $- AY 2007-2008 AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 Total families Low-income families Middle-income families High-income families Parents have led the decline in spending on college Another major decline in contributions came from education, funding 28 percent of college costs from colleges themselves — the primary donors of their savings and income in academic year 2011- scholarship money — with the proportion of families 2012. Two years ago, parents reached deeply into receiving scholarships down to 35 percent in 2012 from their pocketbooks to meet the higher costs of college. 45 percent in 2011. In 2011, families had reported However, this level of spending proved unsustainable. a surge of grants and scholarships, especially among This year, parents cut the amount contributed through middle-income families, offsetting the decline in parent savings and income substantially, by 11 percent from contributions. Similar to the 2010 surge in parent last year, and by 32 percent from two years ago. contributions, the higher levels of scholarships proved Specifically, they have reduced the amount contributed unsustainable, suggesting that colleges, too, are feeling from their current income by 4 percent, and from the impacts of a difficult economic climate, constraints savings by 22 percent since 2011. on endowments, and tighter budgets. Grants and scholarships still fund a higher share of college costs 1 The total amount paid represents the sum of the itemized sources that families than they did in 2009 and 2010 but the 29 percent used to pay for college averaged across all families, including grants and scholarships, contributions from income and savings, assistance from friends share is lower than last year’s one-third share. and family, and borrowing. See tables 11a-d and 12a-d. | 6 | return to table of contents HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 2 : FIgURE 2 — HOw THE TyPICAL FAMILy PAyS FOR COLLEgE: PERCEnT OF TOTAL COST OF ATTEndAnCE PAId FROM EACH SOURCE 2011-2012 o v e r Student Borrowing v 18% ie w Grants & Scholarships 29% o Parent Borrowing f 9% f i N 4% d Relatives & Friends i N Parent Income & Savings g Student Income & Savings 28% s 12% To offset the shortfall from diminishing parent savings This year, the How America Pays for College study and income contributions, students funded a higher explores more deeply how families make decisions share of college costs than in previous years, paying about choosing and paying for college. Decision-making 18 percent of the costs through borrowing and about which college to attend and how to pay is not 12 percent from income and savings. The increase in a collaborative process in most families. Instead, borrowing comes from an increase in the use of federal responsibility tends to lie solely with either the parent loans. This was particularly the case in high-income or the student. Students from low-income families have families, with 27 percent of high-income students much greater decision-making power than their high- using federal loans in 2012, compared with 19 percent income counterparts. in 2011. Despite families seeking lower prices and greater In 2012, families demonstrated increasing cost value in their college choices, financial planning for consciousness in their approaches to paying for college. the payment of college expenses remains low – just This year’s survey confirms the movement to lower-cost 39 percent of families had a plan for paying for college schools initially seen in 2011. Furthermore, families before enrollment.2 This differs markedly by income increasingly rejected schools based on cost earlier in group, with high-income families, unsurprisingly, more the application process. To cut costs, more than half of likely to have had a plan than low-income families. students lived at home while they attended college this year, up nearly 9 percent from last year. Most families also reported cutting personal spending or working longer hours to meet the costs of college. The 2012 How America Pays for College infographic illustrating key data points is available at www.SallieMae.com/HowAmericaPays. 2 In its forthcoming study, How America Saves for College, Sallie Mae will explore the planning and savings habits of parents of children ages 18 and under. | 7 | return to table of contents HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 3: discussioN of fiNdiNgs COLLEgE SPEndIng dECLInES FOR THE SECOnd yEAR RUnnIng In the 2012 How America Pays for College study, representing academic year 2011-2012, average total spending has declined for the second year in a row, by 5 percent to $20,902, as the aftermath of the recession continues to have an impact on the amount families pay for college. FIgURE 3 — HOw THE TyPICAL FAMILy PAyS FOR COLLEgE, yEAR-OvER-yEAR Average Amounts Funding Source Share 100% $30,000 14% 14% 15% 90% 18% $25,000 $24,097 80% 9% 10% 7% 9% $3,396 $21,889 70% $20,902 $20,000 $19,435 $2,261 $$13,,517830 $3,719 60% 36% 37% 30% 28% $2,721 $1,832 50% $15,000 $1,749 $8,752 $6,664 11% $5,955 40% 12% $5,955 10% 9% 4% $10,000 $1,944 $$12,,638124 $$29,35962 $$27,56545 2300%% 6% 7% 4% $5,000 $$41,,815 696 $5,692 $7,124 $6,077 10% 25% 23% 33% 29% $0 0% AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 Student Borrowing Parent Income and Savings Relatives and Friends Parent Borrowing Student Income and Savings Grants and Scholarships In 2012, families shifted how they paid for college in Second, in 2012, fewer families utilized scholarships: three major ways. First, parents cut their contributions 35 percent of all families in 2012, down from from income and savings. In 2012, parents spent an 45 percent in 2011. This decline may be because average of $5,955 from their income and savings, down colleges are unable to maintain previous award levels. from $6,664 in 2011. This is 32 percent lower than In 2012, grant usage remained elevated for the second in 2010, when parent spending peaked at $8,752. year in a row, at 45 percent of families qualifying for Parents’ income and savings paid for 28 percent of grants, likely resulting from a substantial investment by college costs, slightly below last year’s share (30%) the federal government to make Pell Grants available to but significantly below prior years’ (37% in 2010 and more families. As a percentage of total college costs, 36% in 2009). At 58 percent of all families, this is the grants and scholarships covered 29 percent of college lowest percent of families drawing from parent income expenditures in 2012, a higher share than in 2009 or and savings in the past four years’ survey results and 2010, but lower than last year. significantly below the last two years. | 8 | return to table of contents HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 3 : Third, students paid more out of pocket, partially The continuing upward trend in the percent of students d offsetting decreases in parent and scholarship using federal student loans has driven most of the is contributions. This year, students picked up an increase in student borrowing, which has grown c u increased share of their college costs through their from 25 percent in 2009, to 28 percent in 2010, s own savings and income, contributing on average to 30 percent in 2011, and to 34 percent in 2012. s $2,555 in 2012 (12% of the total cost of college). This year, high-income students in particular increased i o their use of federal loans substantially — 27 percent N In addition to contributing more from their savings used federal loans in 2012, up from 19 percent in and current income, students borrowed more in 2012 o 2011. In addition, the average amount students than in previous years. In 2012, students contributed f borrow from federal loans has risen substantially 18 percent of the total cost of college through f (55%) over the last five years, to $7,874 in 2012 from i borrowing, an average of $3,719 compared with N $5,075 in 2008. $3,180 in 2011. d The percentage of students borrowing from non-federal iN loan sources, such as private loans (10%) and credit g cards (3%), has remained consistent in the five years s of this study. FIgURE 4 — STUdEnT USE OF FEdERAL STUdEnT LOAnS, yEAR-OvER-yEAR Average Amount Borrowed Percent Who Borrowed $8,000 $7,000 40% $6,000 35% $5,000 30% $4,000 25% $3,000 20% $ $ $ $ $ 15% $2,000 5 5 5 6 7 ,0 ,3 ,8 ,9 ,8 10% 28 25 28 30 34 7 2 0 8 7 % % % % % $1,000 5 7 7 3 4 5% $0 0% AY 2007-2008 AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 AY 2007-2008 AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 | 9 | return to table of contents HOw AMERICA PAyS FOR COLLEgE 2012 | SUMMARy REPORT SALLIE MAE | IPSOS 3 : d AMERICAn PAREnTS RESPOnd TO A dIFFICULT ECOnOMy i s c u The decline in parents’ contributions toward the total This year, parent contributions from savings have s amount families spend on college represents a major decreased to $1,930, from $2,482 in 2011. While a s shift in spending that began in 2011 and continued similar number of parents used college savings plans i o this year. Parents’ contributions, including contributions as in previous years, the average contribution from this N from income, savings, and borrowing, represent source is down to an average of $820, from $1,481 o 37 percent of the total amount spent on college in in 2011. This suggests that the availability of parents’ f 2012, down from its peak of 47 percent of the total savings has diminished. f amount spent in 2010. i Parent borrowing rose to an average of $1,832 in N d While parents remain the highest contributors to an 2012, a 9 percent share of the total amount spent i undergraduate’s education, particularly those in middle- for college, after dipping in 2011 to $1,573 (7% of N and high-income families, they reduced their personal the total) from a high of $2,261 in 2010 (10% of the g expenditure on college in 2012. The average amount total). In particular, middle- and high-income parents s contributed from parents’ current income in 2012 was relied more on Federal PLUS loans, which contributed $4,025, compared to $4,182 in 2011 and $4,975 in an average of $978 and $1,073 respectively in 2012, 2010. Middle-income families reduced their spending up from $636 and $628 respectively in 2011. from income the most, to the lowest level in the four Parent contributions from borrowing made up 4 percent years of results on non-borrowed sources. Low-income of the total amount low-income families spent on families maintained last year’s increase in parent college, significantly smaller than middle- and high- income contributions. income parents’ shares from borrowing, at 11 percent and 10 percent respectively. Low-income parents contributed less from borrowed sources in 2012 than in 2011, down to $765 from $1,272. FIgURE 5 — HOw THE TyPICAL LOw-InCOME FAMILy PAyS FOR COLLEgE, yEAR-OvER-yEAR Average Amounts Funding Source Share 100% 90% 19% 23% 19% 20% $20,000 $19,890 80% 5% 6% 4% $19,159 4% $16,955 $17,404 $3,774 $3,908 70% 14% 16% 19% 20% $15,000 $3,231 $4,014 $1,272 $765 60% 13% $847 $708 $3,878 $3,836 50% 15% 12% 16% $2,332 $2,850 7% $10,000 $2,173 $2,330 40% 3% 6% 5% $1,222 $2,660 $1,124 $2,976 30% $601 $869 $5,000 20% 42% 38% 38% 36% $7,150 $6,571 $7,512 $6,805 10% $0 0% AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 AY 2008-2009 AY 2009-2010 AY 2010-2011 AY 2011-2012 Student Borrowing Parent Income and Savings Relatives and Friends Parent Borrowing Student Income and Savings Grants and Scholarships | 10 | return to table of contents