How America pays for college

(FOX Providence) - For the third consecutive year, Sallie Mae and the Gallup polling organization have teamed up to take the pulse of college-going Americans and their parents. The survey examines their attitudes and motivations about pursuing a college education and how they are paying for it. Here to talk about the issue is Peter Kerwin from the Rhode Island Higher Education Assistance Authority (RIHEAA) .

Now this survey is particularly interesting, since this is the first group dealing with the aftermath of the financial crisis in late 2008.

The survey is called How America Pays for College and it is really the first examination of how the setbacks in the economy are impacting students and parents. It covers the academic year of 2009-2010 which is the first full year after the economy took that major hit at the end of 2008. And the most interesting finding was what didn’t happen…we didn’t see a significant shift in the types of colleges that students are attending. We didn’t see a big move out of four year institutions and into two year.

College costs have gone up 17% in the last year and 28% over the last two years. Students and families are responding by doing things like imposing cost-saving measures at home. 78% of families reported taking at least two or more of these steps in an effort to help pay for college. 48% of families reported increasing work hours or earnings and 43% report that their student lived at home to reduce costs.

But one thing that really stood out for me was the fact that slightly more than one in four students were ineligible to receive federal grants and student loans because they failed to complete the FAFSA form. FAFSA completion was slightly lower in 2009-2010 across all income categories, but the largest decline was in the group with family income of $50,000 to $100,000. A lot of that is driven by people who are unaware of the FAFSA or don’t think they will qualify for aid. So now you see why I keep coming back here and talking about the FAFSA so often.

What about savings and the role it plays for families?

This report really didn’t examine that issue, but I think it’s important to recognize the role it can play. Here in Rhode Island, we have one of the nation’s largest 529 college savings plans, CollegeBoundfund. It’s a really powerful tool for parents, families and friends to help the loved ones in their lives realize the dream of a college education.

A college savings plan doesn’t have to cover the entire cost of a four-year college education. What’s critical is to have a savings strategy and to use a resource like CollegeBoundfund as a way to help bring down the overall cost of college. Every dollar saved today is one less dollar that has to be borrowed. Anything you can do to reduce your student’s debt level is a good thing.

When you sit down and start thinking about how to pay for college, it can be overwhelming. But if you get started early it makes a big difference. And with the new CollegeBoundbaby program, if you have a baby now and open up a CollegeBoundfund account for the child in the first year of his or her life, we provide $100 to help you get started. It’s just another reason to get an early start on the process of saving for college.