Families borrowing more to meet rising college costs

Even wealthy families are scrambling to cover rising college costs by borrowing more and spending less, according to new research out today from student lender Sallie Mae and the polling firm Ipsos. Families earning more than $100,000 took out more loans in 2011 than the previous year, according to the study, while more students are saving money by attending less-expensive schools and living at home. “In the last few years, parents and students reached into savings to make sure kids got through college,” says Sarah Ducich, senior vice president for public policy at Sallie Mae. Many families have exhausted those funds, she says, just as schools have tightened up scholarships and grants, and tuition is still going up. For 2012, those awards made up 21% of a family’s total cost, down from 25% last year. Families are making up the difference by borrowing more. According to the fifth annual report, wealthy parents borrowed on average $3,399 in 2011 compared with $2,306 the previous year. Students also took out more loans: $2,591 in 2011, about $500 more than in 2010. The typical family now borrows 18% of total college costs in student loans and 9% in parent loans, compared with 15% for students and 7% for parents last year. A small portion of all families—less than 3%—is financing college by charging credit cards, borrowing from retirement funds or using home equity loans. Almost 70% of families eliminated schools from their lists because of their cost, compared with 64% who did so last year and 56% in 2008.