Fewer parents can pay college tuition

Megan Kowalski and Hadley Malcolm | USA TODAY

As families continue to recover from the recession, they're relying less on their own income and savings and more on grants and scholarships to finance a college education than in previous years, according to Sallie Mae's How America Pays for College study to be released Tuesday.

The study, which surveyed a group of 1,602 undergraduates and parents of undergraduates earlier this year, shows that grants and scholarships are used more than any other type of funding, covering 30% of total college costs for a typical family. Five years ago, only half of families reported using grants and scholarships to pay for college. This year, two-thirds of families did, the study shows.

Meanwhile, parents are contributing less of their income and savings toward college costs, covering 27% of college costs compared with 37% in 2010, the study shows.

"The post-recession reality is (parents) don't have the income and savings," says Sarah Ducich, senior vice president of public policy at Sallie Mae. "It's not that they're not willing to stretch. It's that they don't think they have the money to do that."

Parents have developed a more cost-conscious mentality, with more families than ever eliminating colleges their kids were considering for being too expensive. Nearly 70% of families eliminated schools because of costs at some point during the application process, according to the report, compared with 58% who did so in 2008, when the study was first issued.

Student borrowing has been increasing, contributing to 18% of the total cost of college compared with 14% in 2008 and 2009.

But more families will also rely on college savings plans this year than any other year, according to the study. Low-income, middle-income and high-income families have all increased their use of state 529 plans, and the report states that 17% of families used 529 college savings plans to pay for college in 2013, up from 12% the previous year.

Lorrie Ortega, mother of an upcoming senior at Texas A&M University and a 13-year-old son in San Antonio, knows the importance of college savings plans. Thanks to the Texas Guaranteed Tuition Plan, she has been able to pay college tuition for both of her sons to attend state universities in advance of entering school.

She says that without the plan, which has been closed to new enrollment since 2001, her family probably wouldn't have been able to afford tuition and would have had to take out student loans — and she didn't want her sons finishing college with debt.

Ducich worries, though, that still not enough families are planning for the cost of college. Even though the study reports that parents are less worried about increasing tuition and their own economic circumstances than they were in 2010, six out of 10 still don't have a financial plan for all years of college, the study says.

"We're just not seeing enough families plan," Ducich says. "There's a red flag that says some of these families are going to be surprised by the extra cost it's going to take to finish that degree. They're going to have to spend more and finance it in some way."

Contributing: Jayne O'Donnell