An annual survey commissioned by Discover Student Loans shows that the number of parents who plan to help their children pay for college is up from last year.
Parents increasingly feel that a college education is valuable and a worthwhile expense.
But, as many families are learning, there is a big difference between a parent’s willingness and their ability to pay for college expenses.
Families are becoming more sensitive to college affordability and the return on investment (ROI). They are comparing college costs based on net price, the annual cost of college attendance minus the average institutional and/or government grant. If the net price is close among possible colleges the student might attend, families are choosing the college with the better perceived quality. If the net price differs by more than $5,000, they are choosing the less expensive college. In between, they are agonizing over the decision of where to attend.
Families are also increasingly sensitive to the amount of educational loan debt, in part, due to increased media coverage and, in part, due to debt increasing, while family income remains flat. Improved consumer disclosures, such as net price calculators and the (unfortunately not mandatory) shopping sheet standard for financial aid award letters, are also having an impact.
Since 2011, the top reason why students don’t enroll at their first choice college is no longer that they didn’t get in, but rather because of money. Students are increasingly shifting their enrollment from higher-cost cost colleges to lower-cost colleges. Small high-cost private non-profit colleges that recruit regionally are increasingly struggling to make enrollment goals.
When one looks at Payscale.com data on the return on investment, sorting the data by total dollar ROI lists Science Technology, Engineering, and Math (STEM) programs at elite private non-profit colleges at the top. But, when one sorts the data by the percentage ROI, STEM programs at in-state public colleges are listed at the top. The total dollar ROI at in-state public colleges is a little less than the top non-profit colleges, but the rate of return is higher because public colleges cost much less.
According to Mark Kantrowitz, parents are taking a more nuanced approach. They want their children to be able to earn a living, especially if they are borrowing to pay for college. But, they also want their children to be happy. So, while some are steering them toward more lucrative academic majors, others are steering them toward lower-cost colleges where the student can graduate with less debt.
The key is to keep the students’ debt in sync with their income after graduation. This can be achieved either by pursuing a more lucrative academic field of study or by enrolling in a less expensive college. If the student wants to major in underwater basket-weaving, which presumably doesn’t pay very well, the parents aren’t going to send them to the most expensive college.
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