Why families spent less money on college last year

That includes every single dollar that families put toward college costs, including money spent on tuition, fees, and room and board, as well as transportation costs and technology expenses, according to the How America Pays for College report, which surveys nearly 2,000 parents of college students and undergraduates.

Yet tuition costs have continued to tick up for most colleges and universities. The average total cost of a public four-year university for in-state students staying on campus is $26,820 a year and $43,280 for out-of-state students, according to College Board. A year at a four-year private college costs an average of $54,880 for all expenses. 

So why did families report paying less last year? In part, because the pandemic had an impact on college costs, says Rick Castellano, a spokesman for Sallie Mae. Some schools issued refunds for housing costs, while other students opted to remain at home while attending classes remotely—all of which lowered the overall cost. (Some also skipped school entirely: Enrollment at colleges and universities fell in the past year, down 3.5% in the spring semester, according to data from the National Student Clearinghouse.)

“We are seeing a drop compared to last year,” says Jenny Berg, director of Ipsos. But she notes that the college expenses families reported last year are in line with what was reported two years ago. So it’s too early to tell if this is a longer-term trend of declining costs or simply related to the upheaval of the last two academic school years.  

How families are paying for college 

Students and their families covered nearly half of college costs with savings and parental income, according to the Sallie Mae and Ipsos report. Scholarships and grants covered about 25% of the costs, on average, while student loans made up about 11% of the funding. 

Of those students who took out loans, federal student loans were the most common source of funding, and families typically borrowed $8,775 on average, according to the report. Additionally, over half of those who took on loans say they’re already making payments while enrolled in school, thereby minimizing the interest owed. 

But many are leaving money on the table in the form of financial aid. About 68% reported filing for the FAFSA last year, the lowest level in the study’s 14-year history and down from the 77% completion rate reported two years ago. The number of students using scholarships and grants is also down.

Yet despite the hardships students and their families faced over the past year with the pandemic, 89% of those surveyed still believe that college is worth it and creates opportunities. About eight out of 10 believe a college degree will translate to higher future career earnings as well. “People feel like they’re getting value, that the education they’re receiving is worth the price,” Berg says, adding that sentiment has remained steady for the past four years.