Even wealthy families are scrambling to cover rising college costs by borrowing more and spending less, according to new research.
Families earning more than $100,000 took out more loans in 2011 than the previous year, according to a report released Monday by student lender Sallie Mae and the polling firm Ipsos. Additionally, 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," said Sarah Ducich, senior vice president for public policy at Sallie Mae. Many families have exhausted those funds, she said, just as schools have tightened up scholarships and grants and tuition is still going up. For 2012, those awards made up 21 percent of a family's total cost, down from 25 percent 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 percent of their total costs in student loans, and 9 percent in parent loans, compared with 15 percent for students and 7 percent for parents last year. A small portion of all families -- less than 3 percent -- is financing college by charging credit cards, borrowing from retirement funds or using home equity loans.
Almost 70 percent of families eliminated schools from their lists because of their cost compared with 64 percent last year and 56 percent in 2008.
Unfortunately, only 39 percent of families said they had thought about how they would pay for all four years of college compared with 45 percent last year, said Ducich. "The worst thing you can do is get one or two years into a degree and not have a way to finish," she said.
Even wealthy families are discovering that they could save significant amounts of money by having Junior live at home while attending college.
Almost half -- 47 percent -- of students whose families earn more than $100,000 are living at home while attending college compared with 37 percent in 2011 and 24 percent in 2010. However, 53 percent of students with family income of $35,000 to $100,000 live at home. The ratio is highest among Hispanic families -- 77 percent live at home.
While the U.S. Department of Education estimates that living at home during college can save roughly $6,000 a year, Chrissy Callahan estimates that her family saved about $45,000 during the four years she lived at home while she attended Brandeis University, in Waltham, Massachusetts, from which she graduated in 2010.
"I lived close enough to school that it didn't really make sense to blow so much money away to live in less-than-ideal living situations," said the 23-year-old who works in Web journalism. "My sister had also commuted to college and enjoyed it, so it was a pretty easy decision."
The choice also helped Callahan graduate debt free and on a much better financial footing than a lot of her fellow graduates.
"I definitely appreciate the discipline that commuting gave me," she said. "It forced me to plan out my days in advance and prepped me for the real world."
(Follow us @ReutersMoney or at Reuters Personal Finance; Editing by Jilian Mincer and Matthew Lewis)