Spending on college soars 16%
NEW YORK (CNNMoney) — For the first time in five years, parents opened their wallets wider to spend more on college this year.
On average, families spent $24,164 for college in the 2014-2015 academic year, according to the annual How America Pays for College report from Sallie Mae. That’s a 16% increase from the previous year.
The figure includes tuition, room and board, transportation and all other college-related expenses.
As expected, the rising cost of college was a factor. But also at play was that parents’ higher degree of confidence in the economy and their financial health.
The report found that they have chosen to pay more toward the cost of college this year more likely because they were less worried about economic factors that had been plaguing them since the recession.
Compared to 2014, fewer parents this year were extremely worried that their income will decline due to job loss, or that the value of their home will fall and loan rates will increase, or that their child won’t find a job after graduation, according to the report.
That’s also reflected in how families paid for college. Parent contributions surpassed scholarships and grants as the largest funding source for the first time since 2010. For the average student attending college, 32% of the total cost came from their parent’s income and savings, compared to 30% from scholarships and grants.
Parents took out the same amount of money from their savings. But they dipped into their current income 40% more than they had in 2013-2014.
“Parents do seem to feel more secure about their income,” said Marie O’Malley, Sallie Mae senior director of consumer research. It’s the lowest level of worry since the report started eight years ago.
“They’re not worried about their income going down or losing their jobs,” she said.
While spending on college increased across all income groups, it was the highest for those in the top income bracket — up 25% from a year earlier. That means that high-income families paid $12,000 more for college in 2015 than middle- and low-income families.
In fact, their contribution played a big role in the overall spending increase.
O’Malley said that wealthier families increased spending for the same reason other parents did. Even though they have more money to spend, they weren’t spending it as readily until they felt more confident about the economy and their financial situations.
The study is based on telephone interviews with 800 parents of children between the ages of 18 and 24 who are enrolled as undergraduate students and 800 students who fit the same criteria.