If you're looking at your kids' classmates and wondering how their parents are paying for college, you're definitely not alone.
With the cost of higher education rising at exponential rates, the tuition prices facing parents are, at best, overwhelming. No one would blame you if thinking about paying your kids' college tuition made you want to just climb back into bed and pull the covers over your head.
But we can also tell you that lots of families are figuring it out through a combination of income, saved money, gift aid, and financial aid. A recent report from Sallie Mae details exactly how families in the United States are paying for college.
Seeing how other families are managing the financial load may help your family develop a plan for covering the costs of one (or more) college educations. You may also refer to the information to help your children understand their options.
The average cost of a college degree
The hard truth is that for many, college is an expensive proposition. The average amount paid for college in 2018-2019 was $26,226.
Scholarships and grants, along with parent income and savings, make up the two largest funding sources for college. But more than eight out of ten families rely on financial aid to pay for at least some portion of college.
How much families pay and how much they borrow
While the large majority of families are using financial aid, that aid doesn't make up the biggest share of college funding. During the 2018-2019 academic year, family income and savings covered about 43% of college costs. And that includes income and savings from both parents and students.
Of course, whenever possible, families relied on the least-expensive resource for paying college tuition—scholarships, grants, and gifts. These made up 33% of college costs in the 2018-2019 year. Scholarships and grants covered 31% (or $8,117). Gifts from relatives and friends covered about 2%.
So that leaves 24% of the cost covered by borrowed money.
How much parents pay and how much they borrow
While families are borrowing 24% of the cost of college per year, parents aren't covering the full brunt of that. In 2018-2019, parents borrowed 10% of the cost of college.
They paid $7,801 from income and savings. This amount covered 30% of the cost of a year of college, and it's a 4% decrease from the amount parents paid from their own income and savings in the previous year—$8,891.
So, in total, parents contributed 40% of the cost of one year of college for the 2018-2019 academic year.
How much students contribute and how much they borrow
As you may have anticipated, students provide less of the college funds that come from income and savings, providing 13% ($3,502) out-of-pocket, compared to their parent's 30%.
But they borrow more than their parents—taking out loans for 14% of the cost of college—approximately $3,746.
How far does gift aid go?
With the costs of high education rising, receiving a scholarship or a grant for any portion of tuition is a win. But for most students, gift aid doesn't cover the cost of their college education. Scholarships and grants made up 33% of college costs in 2018-2019.
If your 11th grader has their heart set on an expensive out-of-state school and plans to pay for it with scholarships, you may want to share these numbers and have a conversation about whether those expectations are realistic.
What if you need student loans?
Obviously, student loans are a necessity for many college students. We advise everyone to fill out the FAFSA and max out any federal student loan dollars that are offered before turning to private student loans. If you must borrow additional money, be sure to work with a reputable lender and shop around for the best interest rate.
Katie Taylor is a content writer and editor with expertise in law and policy, finance, and entrepreneurship. She writes for startups and small businesses about everything from bookkeeping to telecom. Her work has been featured in The Washington Post and SheKnows.com. She is continuing to pay off law school loans and lives in Richmond, Vermont with her wife, son, and an unruly dog. Read more by Katie Taylor