SUMMER 2013
Financial Planning and College Costs
The Parent Perspective
University Research Partners is the research division of Royall & Company.
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FINANCIAL PLANNING AND COLLEGE COSTS
EXECUTIVE SUMMARY
In the recent past, the cost of getting a college education has been a common topic in American news.
Estimates suggest that the average tuition at public institutions increased 8.3% in the past year, due in
part to both true increases in costs and declines in state appropriations to public institutions (Hicken, 2013).
In its most recent survey of college pricing, the College Board reports that a moderate student budget
for an in-state public college for the 2012-2013 academic year averaged $22,261; a moderate budget at
a private college averaged $43,289. It is not uncommon to see news stories that emphasize seemingly
incomprehensible costs of college in 10+ years. For instance, a report from Sallie Mae, “How America Saves
for College 2013,” suggests that in 10 years one year of education will cost $139,028 at a public institution and
$248,878 at a private institution.
To explore perceptions of college costs, University Research Partners surveyed a national sample of
2,000+ parents of college-bound high school students. Parents shared their concerns as well as their
plans for paying the costs of higher education for their children. This report summarizes the findings.
On the following pages, you’ll discover:
•
What parents are most concerned about when it comes to their children’s college decision
•
How parents plan to fund their children’s college education
•
How much parents are willing to spend for their children’s college experience
•
What parents think the role of loans should be in funding higher education
•
How parents balance costs and perceptions of quality in the college search process
Here’s a brief summary of our key findings:
•
Almost three out of four parents (72.4%) reported that the cost of attendance has spurred their
interest in public/state institutions for their children.
•
It is the cost for their child to attend his or her first-choice school that is making parents
most anxious.
•
Parents who did not complete college are more likely to be planning on grants and scholarships
for funding their children’s education than are parents who completed college.
•
Parents who completed college are significantly more likely to rely on funds from their own
income and savings and/or funds invested in a college savings plan than are parents who did not
complete college.
•
A significant percentage of all parents are unsure about the total amount they would be willing to
spend for their children’s education per year (28.0%).
•
Overall, parents appear to be making decisions relatively late in the college choice process
when considering the size of the financial investment that is required of most families.
FINANCIAL PLANNING AND COLLEGE COSTS
Current and future costs of getting a college education have garnered much attention recently,
with many parties interested in what may be at stake. As tuitions increase, there is a growing
concern regarding families’ preparation for managing the costs of a college education for their
children. Data published in Sallie Mae’s “How America Saves for College 2013” report and the
StudentPoll (2012) report suggest that:
• Most families have not saved enough for their child’s postsecondary education; even those
who have saved are doing so based on what they can afford to set aside rather than any
specific amount they will need to cover college costs.
• Most parents report their teenage children do not save for their own college education.
• Parents report a higher percentage of their child’s educational costs will be paid by grants
and scholarships than by their own income or savings.
• Students may have unrealistic expectations when it comes to applications for merit aid,
with three out of four reporting they expect to receive merit aid for academic achievement.
• Most parents report they anticipate that at least one-quarter of their child’s educational
costs will be funded through loans (parent and/or student loans), but they remain unsure
as to the actual amount to be borrowed.
In a study conducted in early 2012 by University Research Partners, both students and parents
agreed that parents have a high level of influence over the amount of money that will be spent
on the child’s education and the amount of debt the family will incur. More than three out of four
parents surveyed (77.6%) indicated they had spoken with their child about financing college, and
more than half (55.0%) had helped their child complete scholarship/financial aid applications.
The goal of the research reported here was to learn more from parents about their perceptions
of college costs and how they are preparing and planning for their child’s educational future. The study involved a national survey of parents of college-bound high school students, which
concluded in the spring of 2013.
2
THE PARENT PERSPECTIVE SUMMER 2013
KEY FINDING
1. COLLEGE COST IS A CONCERN, BUT IT IS NOT THE ONLY THING PARENTS ARE
WORRIED ABOUT WHEN CONSIDERING THEIR CHILD’S COLLEGE CHOICE.
On average, parents rated the cost for their child to attend his or her first-choice school and whether their
child will be admitted to his or her first-choice school of greater concern than overall costs.
All parents – those with a four-year college degree or more and those without a college degree – are most
concerned about the cost of attendance at their child’s first-choice school. Considering the other factors
displayed below, parents with and without college degrees expressed similar concerns.
Q. As you consider your child’s future, what makes you most concerned or anxious?
Full
Sample
Without
4-Year
Degree
With
4-Year
Degree
Mean
Mean
Mean
The cost of attending first-choice school
1.57
1.50
1.58
The cost of attending any college
1.87
1.92
1.79
How much financial support will be provided
2.06
1.96
2.07
Whether the cost of attendance will increase after enrollment
2.60
2.75
2.54
Full
Sample
Without
4-Year
Degree
With
4-Year
Degree
Mean
Mean
Mean
Whether he/she will be admitted to first-choice school
1.77
1.92
1.79
If the college where he/she enrolls will be a good fit
1.88
2.04
1.86
Whether he/she will be successful in college
2.07
2.15
2.05
His/her personal safety on campus
2.20
1.79
2.25
His/her exposure to drugs and alcohol on campus
2.30
2.18
2.33
Whether he/she will be able to get a job after graduation
2.40
2.41
2.39
Cost Factors
Other Factors
Means are based on the ranking of the concern from 1 to 3, where 1 indicates greatest concern.
Highlights denote significant differences by parent’s level of academic attainment.
NOTE: In addition to the factors provided in the tables above, parents expressed concern about the debt
their child would have upon graduation, their child’s ability to complete college in four years, and
whether their child would be admitted to graduate school after college.
3
FINANCIAL PLANNING AND COLLEGE COSTS
In terms of differences revealed in parental concerns, the following table reveals an interesting, but
predictable, pattern regarding household income and cost concerns. Parents with household incomes
in the middle ranges ($30,001-$90,000) report the greatest levels of concern regarding cost and financial
support. This may be due to the perception among higher-income families that they can draw upon
income and savings and the perception among lower-income families that they may qualify for need-based
awards, while middle-income families may believe they don’t have either resource available to them.
$30,000
or Less
$30,001$60,000
$60,001$90,000
$90,001$120,000
$120,001
or Greater
Mean
Mean
Mean
Mean
Mean
The cost of attending any college
1.94
1.66
1.82
1.93
2.07
How much financial support will be provided
2.07
1.86
2.07
1.98
2.12
Cost Factors
When asked to consider the relative importance of certain criteria used in college choice, parents
identified academic programs as more important than financial considerations. Consequently, while
parents clearly indicate concerns over paying for college, they also feel a strong need to ensure that
their child can study his or her program of choice in a school of his or her choice. One might surmise that
whatever the financial implications, parents have a strong emotional drive to help their children see their
college dreams come true … or at least a need to minimize any sense of guilt over preventing some future
success their child might achieve.
Drawing upon their perceptions of price and value, parents ranked a set of characteristics and outcomes
viewed as worth the price of higher education. For most parents, excellence in teaching is perceived
as most valuable, followed by successful job placement after college and strong support services while
in school.
Q. When you think about college costs and what your child gets for the price you pay, what would you
say is most valuable to you? What characteristics and outcomes are worth the price you would pay
for your child to attend college?
Top-Ranked Characteristics and Outcomes
Excellence in teaching
1.66
Successful job placement after college
1.90
Strong support services for students’ academic success
1.95
Means are based on the ranking of value from 1 to 3, where 1 is most valuable.
4
Mean
THE PARENT PERSPECTIVE SUMMER 2013
Other Ranked Characteristics and Outcomes
Mean
Successful graduate school placement after college
2.00
National/international reputation
2.01
Strong institutional traditions
2.02
Small class sizes
2.12
Safe and secure campus environment
2.19
Modern, state-of-the-art classrooms, laboratories, and other academic resources
2.19
Faculty mentors
2.29
Opportunity to play competitive sports
2.37
Modern, state-of-the-art residential, dining, and/or recreational facilities
2.44
Strong service culture
2.52
Supportive alumni network
2.59
Abundance of extracurricular activities
2.67
Means are based on the ranking of value from 1 to 3, where 1 is most valuable.
KEY FINDING
2. MANY PARENTS ARE UNSURE ABOUT HOW MUCH THEY WILL SPEND ANNUALLY FOR
THEIR CHILD’S EDUCATION, AND MOST PLAN TO RELY ON A VARIETY OF POTENTIAL
RESOURCES TO COVER COLLEGE COSTS.
Parents indicated the maximum amount they
would pay for their child’s college attendance.
In addition, they indicated what resources
they would draw upon to meet college costs,
including (1) income and savings and
(2) borrowed funds (student and parent loans).
Results for parents who were able to
identify a specific amount they are
willing to pay per year for their child’s
college attendance are displayed in the
following table.
Percent
Cumulative
Percent
$5,000 or less
13.6
13.6
$5,001-$10,000
11.6
25.2
$10,001-$15,000
13.0
38.2
$15,001-$20,000
12.7
50.9
$20,001-$25,000
11.9
62.8
$25,001-$30,000
9.8
72.6
$30,001-$35,000
4.5
77.1
$35,001-$40,000
5.0
82.1
$15,001-$30,000
$40,001-$45,000
3.1
85.2
$30,001 or more
$45,001-$50,000
5.0
90.2
$50,001 or more
9.8
100.0
The chart below reveals the high percentage of
parents indicating they are unsure about how
much they are prepared to spend each year for
their child’s education.
25%
Unsure
$15,000 or less
27%
20%
28%
5
FINANCIAL PLANNING AND COLLEGE COSTS
Parents anticipate using funds from multiple sources to cover their child’s college education, including funds
directly from income, college savings, regular savings, loans, grants, and scholarships. A significantly higher
percentage of parents with college degrees than those without are prepared to cover a portion of college
costs using savings of some kind and/or their own income; a significantly higher percentage of parents
without college degrees indicate a reliance on student loans. While this question did not directly address
parental attitudes toward borrowing, the results suggest a disadvantage for parents who did not complete
college. Their children are more likely to graduate from college with greater loan debt to manage.
Q. In terms of the comprehensive costs for your child to attend college (tuition, fees, housing, and meals), what
is the maximum amount you would pay from income and savings and/or with borrowed funds per year?
Income and Savings Amount
Borrowed/Loan Amount
Percent
Percent
Unsure/don’t know
22.2
30.2
$5,000 or less
15.3
18.7
$5,001-$10,000
15.0
18.7
$10,001-$15,000
11.7
11.2
$15,001-$20,000
6.9
7.0
$20,001-$25,000
8.1
4.0
$25,001-$30,000
6.3
3.6
$30,001-$35,000
2.6
0.6
$35,001-$40,000
2.7
1.2
$40,001-$45,000
2.0
1.4
$45,001-$50,000
2.2
1.2
50,001 or more
5.2
2.0
Income and Savings Amount
Borrowed/Loan Amount
Without 4-Year
Degree
With 4-Year
Degree
Without 4-Year
Degree
With 4-Year
Degree
Percent
Percent
Percent
Percent
Unsure/don’t know
33.7
18.3
39.8
26.3
$5,000 or less
23.8
14.1
10.8
20.6
$5,001-$10,000
13.9
15.2
10.8
21.0
$10,001-$15,000
11.9
12.4
17.2
10.4
$15,001-$20,000
6.9
6.9
9.7
6.7
$20,001-$25,000
5.0
9.2
2.2
4.2
$25,001-$30,000
3.0
6.9
2.2
3.8
$30,001-$35,000
1.0
2.7
1.1
0.6
$35,001-$40,000
0.0
3.4
1.1
1.5
$40,001-$45,000
0.0
2.2
0.0
1.9
$45,001-$50,000
1.0
2.7
2.2
1.3
$50,001 or more
0.0
6.1
3.2
1.9
Highlights denote significant differences by parent’s level of academic attainment.
6
THE PARENT PERSPECTIVE SUMMER 2013
As shown on the opposite page, the results are even more striking for parents who did not complete
college, suggesting they may be less aware of the cost implications associated with college attendance
than parents who have more direct experience with college.
Parents who did not complete college are far more likely to be unsure of what they can spend as a
family on their child’s college education than parents who have a college degree or greater educational
attainment (33.7% compared with 18.3%). Furthermore, the percentage willing to borrow at various
amounts is telling. About 40% of parents who did not complete a college degree are unsure about how
much they can or are willing to borrow compared with 26% of those with college degrees. Further, about
half of parents with college degrees indicate they will borrow $15,000 or less per year, while a higher
percentage of those without college degrees indicate a willingness to borrow at higher levels. A higher
percentage of parents with college degrees know what they can fund through income and savings
compared with those without college degrees. Generally, we can surmise that parents who did not
complete college are less prepared for the financial implications of their child’s education.
Q. How will your child’s educational costs be paid?
Full
Sample
Without 4-Year
Degree
With 4-Year
Degree
Percent
Percent
Percent
Academic grants and scholarships (funds that will NOT need
to be repaid)
37.6
40.9
36.7
Funds from your income
26.3
22.1
27.1
Funds your child will borrow (including student loans provided
by the school)
24.7
29.5
23.1
Funds from your savings other than college savings plans
20.6
10.9
23.1
Other grants and scholarships (funds that will NOT need to be
repaid)
21.3
21.0
20.8
Funds from a 529 or other college savings plan
20.5
8.5
22.5
Funds you will borrow (bank loans, home mortgage, credit
cards, PLUS loans)
20.3
23.0
19.6
Athletic grants and scholarships (funds that will NOT need to
be repaid)
14.2
19.6
12.9
Funds provided by relatives and friends
7.9
4.1
9.2
Your child’s income and/or savings
7.6
7.2
8.1
Percentages represent the portion of the total education costs parents expect to be covered by each source.
Highlights denote significant differences by parent’s level of academic attainment.
As displayed above, parents indicated a heavier reliance on income/savings and grants/scholarships than
on loans. These results suggest parents recognize the implications of using loans to manage educational
costs and prefer to fund their child’s education in other ways. Yet parents without college degrees may
believe they are less able to cover college costs without borrowing funds.
7
FINANCIAL PLANNING AND COLLEGE COSTS
The following chart on the left shows the percentages of parents who expect some portion of their child’s
education to be funded through (1) income/savings, (2) grants/scholarships, and (3) loans. The chart on the
right shows the percentages of parents who expect (1) income/savings, (2) grants/scholarships, or (3) loans
to cover 100% of the cost of their child’s education. Note that the vast majority of parents recognize they
cannot rely on a single source to entirely fund their child’s education.
10.0%
60.0%
55.7%
40.0%
8.0%
53.9%
9.4%
6.0%
37.9%
5.4%
4.0%
20.0%
2.0%
0.0%
Income/
savings
Grants/
scholarships
Loans
0.0%
2.4%
Income/
savings
Grants/
scholarships
Loans
The following tables display findings regarding families’ plans to apply for scholarships and financial aid for
their child. These data show slightly more parents this year than last year reporting they/their child will apply
and expect to qualify for scholarships. 2013 Study
2012 Study
Percent
Percent
We will apply and expect to qualify for scholarships (i.e., academic, athletic, other).
64.2
62.2
We will apply but don’t know if my child will qualify for scholarships.
34.9
34.1
We will not apply for scholarships.
0.9
3.8
2013 Study
2012 Study
Percent
Percent
We will apply but don’t know if we will qualify for need-based financial aid.
55.3
55.0
We will apply and expect to qualify for need-based financial aid.
27.8
27.3
We will not apply for need-based financial aid.
16.8
17.7
Scholarships
Need-Based Financial Aid
8
THE PARENT PERSPECTIVE SUMMER 2013
KEY FINDING
3. PARENTS MAY BE WAITING TOO LATE IN THE COLLEGE SEARCH PROCESS TO ENABLE
OPTIMAL DECISIONS THAT BALANCE COST AND QUALITY.
When asked when they are most likely to consider college costs, 50.6% of parents reported they will
consider costs only after the admission decision and financial awards have been received. Given the
overall lack of savings and financial planning undertaken by most families, even among those at higher
income levels, this wait-and-see approach could place families in a position of considering limited
options – at least in terms of the financial value.
Although the differences are not statistically significant, the results suggest parents with a college degree
may be more likely to consider the cost of college throughout their child’s college choice process, while
those without a college degree are more likely to consider costs and affordability only when admission
decisions and financial aid awards are made. There is a clear disadvantage to families’ receiving financial
information late in the college choice process. The result could be a delay in the child’s education
and/or a heavier reliance on loans. It was no surprise to find that parents who already have a child in
college are more likely to consider costs throughout the process. Clearly, the experience of going through
the financial aid process influences parent preparedness and planning.
Q. At what stage of the college search process are you most likely to focus on college costs?
Percent
Costs will come into play only after the admission decision and financial awards are received.
50.6
I am considering cost of attending throughout the college search process.
33.4
Cost of attending will be/was considered during the application phase.
11.4
Unsure/don’t know
2.6
Without
4-Year
Degree
With
4-Year
Degree
Percent
Percent
Costs will come into play only after the admission decision and financial awards
are received.
52.0
50.9
I am considering cost of attending throughout the college search process.
27.1
34.2
Cost of attending will be/was considered during the application phase.
15.3
10.4
Unsure/don’t know
5.1
2.2
1st Child
to Attend
College
Not 1st Child
to Attend
College
Percent
Percent
Costs will come into play only after the admission decision and financial awards
are received.
53.7
47.1
I am considering cost of attending throughout the college search process.
31.1
36.7
Cost of attending will be/was considered during the application phase.
10.7
12.0
Unsure/don’t know
2.8
2.0
Highlights denote significant differences by parent’s level of academic attainment and by status of children in household attending college.
9
FINANCIAL PLANNING AND COLLEGE COSTS
It is important to note that their lack of early planning may be related to when financial information is provided
to parents by institutions. Many parents indicated they would like to receive financial information as early
as their child’s freshman year of high school. Yet many institutions do not send cost-related materials until
considerably later, generally late in the junior year or into the senior year.
Q. Considering the topics you want to know more about, when would you like to receive information?
Student’s
Freshman
Year
Student’s
Sophomore
Year
Student’s
Junior
Year
Student’s
Senior
Year
Percent
Percent
Percent
Percent
Admission requirements
44.0
40.9
56.3
30.0
General information about the college
39.7
47.6
38.3
13.5
Sources of funds to pay for college
34.8
25.4
43.7
35.0
Costs (e.g., tuition, fees, housing)
32.1
33.7
68.8
45.9
Location of the school and area around it
31.0
38.6
53.1
24.8
Degree programs
29.9
41.1
60.7
25.6
Majors/minors
29.3
40.9
63.8
30.4
Financial aid
29.3
22.1
47.1
46.1
Scholarships
29.3
27.2
60.0
54.3
Careers related to specific majors
25.5
25.2
38.7
24.8
Overall, parents say they will encourage their child to select the best overall package, given an assessment
of costs, financial resources, and quality. This finding needs to be considered in light of the fact that many
families have narrowed down their options prior to receiving financial information. Thus, the best financial
package is already limited to those schools in the consideration set.
Nearly two-thirds of parents reported that they would encourage their child to enroll at the school that
offered the best overall package. Given that most parents are waiting to make financial decisions until after
admission and financial aid is awarded, this best-package scenario is already one of limited options.
Q. Which of the following statements best reflects your plans regarding scholarships and need-based
financial aid and college choice?
Percent
10
I will consider the best schools and encourage my child to enroll at the one offering the best total
package (i.e., the most money/greatest discount) – including merit-based scholarships and/or
need-based financial aid.
69.0
I would encourage my child to enroll at the best school (i.e., the highest-ranked, most prestigious)
regardless of the merit-based scholarships and/or need-based financial aid we receive.
20.7
I would encourage my child to enroll at the school that offers the best total package, even if it is not
the best school.
10.3
THE PARENT PERSPECTIVE SUMMER 2013
WHAT CAN COLLEGES AND UNIVERSITIES DO TO HELP PARENTS BE BETTER PREPARED?
Parents want to be more prepared to meet the financial requirements of their children’s higher education
aspirations. Survey findings suggest ways institutions can facilitate better financial planning among
parents. The tools and guidelines institutions might offer are especially important for students whose
parents did not complete a college degree themselves.
1. Bring parents into the conversation early and discuss the costs of college and the impact on the
family’s financial situation before your institution is removed from their consideration set.
2. Profile your institution in terms of the school characteristics parents value most – the ones that will set
their child up for success in school and upon graduation.
•
Help parents think about the return on investment for their child’s education at your institution. •
Provide salary estimates for likely careers being considered.
•
Use alumni profiles to personalize the information.
3. Guard against families’ using a cost-estimate calculator as their sole source of cost information.
Engage parents in conversations that allow you to provide necessary counsel regarding costs and the
availability of grants, scholarships, and other forms of financial aid.
•
Encourage early campus visits (during students’ sophomore or junior years) that offer special
opportunities to share important informational resources for families.
•
Use blogs or other online resources that engage parents in discussions and information sharing.
•
Activate a “parent council” among parents of current students and alumni as a resource for
prospective students’ families.
References
Hicken, M. (March 6, 2013). Public College Tuition Spiked 8.3% Last Year, CNN Money, Available online:
http://money.cnn.com/2013/03/06/pf/college/public-college-tuition/index.html
Sallie Mae (2013). How America Saves for College, Available online: https://www.salliemae.com/assets/Core/
how-America-saves/HowAmericaSaves_Report2013.pdf
StudentPoll (2012). A majority of students rule out college based on sticker price. StudentPoll, 9 (1), Available
online: http://www.artsci.com/studentpoll/v9n1/index.html
University Research Partners (Spring 2012). Engage Parents for More Engaged Students: Three Engagement
Building Blocks for Enrollment Managers, Available online: http://www.royall.com/resources/research.
11
ABOUT THE STUDY
Royall & Company’s University Research Partners surveyed 2,046 parents of college-bound
high school students. The study focused on parents’ opinions about the cost and perceived
value of a college education for their child. The majority of parents participating in the study
are married women with college-bound daughters; the majority of the students considered for
the survey are high school seniors and will be the first among their siblings to attend college.
On average, respondents are well-educated, are employed, and have significant household
incomes. All 50 states and the District of Columbia are represented by the study participants.
A demographic overview of the participants:
• 78.4% are in traditional families (child is living with both parents in the same household).
• 73.5% are mothers/female guardians and 26.5% are fathers/male guardians.
• 57.0% have a daughter going to college and 43.0% have a son.
• 63.0% indicated this child will be their first to attend college.
• For 73.3%, the child is a high school senior; for 26.7%, the child is a high school junior.
• 70.9% are Caucasian and 29.1% are parents of color.
• 7.4% have an estimated household income of $30,000 or less, 15.0% have an income
between $30,001 and $60,000, 17.9% have an income between $60,001 and $90,000,
19.8% have an income between $90,001 and $120,000, and 39.9% have an income of
$120,001 or greater.
• 74.6% have a four-year degree or higher.
• 23.9% are from the Middle States, 20.3% are from the West, 19.8% are from the Midwest,
16.7% are from the South, 9.4% are from the Southwest, and 8.7% are from New England;
1.2% are from outside the U.S.
For additional information about this study or other research on higher education, please contact
Pamela Kiecker Royall, Ph.D., Head of Research, at pkiecker@royall.com or 800.899.7227.
12
1920 East Parham Road l Richmond, Virginia 23228
royall.com l 800.899.7227