College Planning and Scholarships up, FAFSA Filing Down

Journal of Financial Planning: January 2021

 

Perhaps it’s all the good work of financial planners incorporating college planning into the financial planning process. Maybe not. Either way, something good is going on.

According to the 2020 How America Pays for College report from Sallie Mae, 52 percent of families surveyed had a college funding plan in place for the 2019-2020 academic year. Sallie Mae reports that’s up from the 44 percent of families that had a plan for the 2018-2019 academic year.

Other news from the report that might be relevant to your clients includes:

Parents are still paying a majority of the college bill. The report found that families contributed an average of $30,017 in the 2019-2020 academic year. Around 44 percent of that amount is paid by parent income and savings, 25 percent by college grants, 13 percent by student borrowing, and 8 percent by parent borrowing. The remainder is a combination of student income and savings and relatives’ contributions. The report also noted that 20 percent of parents are taking out loans to help pay for their children’s college.

Use of 529 accounts and scholarships is up. Around 37 percent of families used 529 plans during this academic year, versus only 21 percent in 2018-2019. Sallie Mae reported that scholarships were the “second biggest source of funding,” with 58 percent of families using them.

FAFSA filing is down. Your clients’ kids may be leaving money on the table. Sallie Mae reported that the number of students filing the FAFSA (Free Application for Federal Student Aid) was down for this academic year. Only 71 percent of students filled out their FAFSA for the 2019-2020 academic year, versus 77 percent for the 2018-2019 academic year, and 83 percent for the 2017-2018 academic year. The reason people didn’t fill out the FAFSA, according to Sallie Mae, was that they didn’t think they’d qualify for any aid.

Read the full report, which includes helpful planning tips, at www.salliemae.com/about/leading-research/how-america-pays-for-college/.