How Families Budget for College During COVID-19
ollege students and their families enter another uncertain year this fall. Last year, they wondered whether classes would be in-person or virtual, and this year vaccine and mask requirements are popping up daily at institutions throughout the country as case counts rise again.
But a report surveying undergraduates and their parents about the 2020-2021 academic year found that the pandemic didn't upend how they paid for college. Sallie Mae's How America Pays for College 2021 report, released July 19, outlined this typical budget breakdown: On average, a student's college costs were covered by 45% parent income and savings, 25% free scholarships and grants, 11% student loans, 9% parent loans, 8% student income and savings, and 2% funds from relatives and friends.
"I was shocked to see that the ways parents and students paid for college did not really change as a result of the pandemic," says Ashley Boucher, a Sallie Mae spokesperson. "We did see a decrease in the total number of dollars they spent, but that was to be expected as some of those costs of being on campus were not required because of the pandemic."
Many survey respondents instead indicated that they had a plan to pay for college and were taking active steps in preparation for the expense. Boucher says it appears many were able to stick to that plan. This portion of families is up from previous years. In 2021, 58% of families agree that before their student enrolled, the family created a plan for paying for all years of college – continuing a steady, upward trend from 40% in 2018 to 44% in 2019 to 52% in 2020.
Creating a budget to pay for college is a critical step in reaching a student's higher education goals. This budget can include a plan to save for college in the years leading up to a student's graduation from high school using tax-advantaged savings accounts like 529 plans, as well as a plan to apply for scholarships and federal student aid to help fill any gaps in affordability.
This budget should be created as early as possible, experts say, to ease the burden of saving for parents and allow students more time to contribute through a part-time job and apply for scholarships, many of which have early spring deadlines. Advance planning can also help families create realistic goals and savings plans, avoiding the sticker shock that sometimes comes with applying to colleges.
"This past year and a half has brought families unprecedented financial challenges, and for many, it has been a difficult time to save for college," Rita Assaf, vice president of retirement and college leadership at Fidelity Investments, wrote in an email. "With the cost of college rising, and so many parents telling us they expect to pay far less than what the cost actually is, it's important parents save what they can, when they can, and include education in their overall financial plan."
Experts recommend that virtually every student complete the Free Application for Federal Student Aid, or FAFSA, which opens the door to federal and many state financial aid options such as scholarships, Parent PLUS Loans and subsidized and unsubsidized student loans. Families can also rely on local scholarships and private student loans.
While more families may be budgeting for college, Sallie Mae's report also confirms the continuation of a downward trend in FAFSA completion, seen in both prospective college students and current college students.
The current school year marked the lowest FAFSA completion rate in the survey's 14-year history. Just 68% of current undergraduates submitted the FAFSA in 2020-2021, compared with 71% the prior year, according to Sallie Mae's survey. Meanwhile, 55.4% of the high school class of 2021 has completed the FAFSA, representing a 4.5% decline in FAFSA completion, according to the National College Attainment Network. This data on high school student FAFSA completion could indicate a drop in college enrollment this fall, MorraLee Keller, director of technical assistance at NCAN, says.
"There are a lot of students who took a pause during this last academic year that were currently enrolled," she says. "The pandemic created all of the uncertainty around the college experience, but it also created an economic impact. People have lost jobs, reduced hours, and so there may have been families on the bubble about whether they could afford college or not. It's a negative impact on the family income that may have ceased the plans right there for a postsecondary education."
Prospective and current college students still have time to complete the FAFSA, and those students who have already received their financial aid offer should keep in mind that 71% of students who submitted an appeal of that offer with their college were granted more financial aid in 2020-2021, according to the Sallie Mae report.
"Families really realized they are in the driver's seat when it comes to financial aid," Boucher says. "The conversation about aid doesn't end with the financial aid offer letter – in fact, the conversation is going to begin there."
Story by: Emma Kerr
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