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Families are finding alternatives to student loans


Many Americans still see the value of a college degree, but some are less willing to go into debt for that diploma, a new study shows.

Families are taking steps to lower the overall cost of school and paying for more of those costs with their own savings, according to a survey released Thursday by Sallie Mae. For instance, 7 in 10 families said their child opted to go to an in-state college. And 54 percent of the families surveyed said they were saving by having the college student live at home or with a relative.

"What we see is for American families, their commitment to college is as strong as it has ever been," says Sarah Ducich, co-author of the report. "But because of that, they are making deliberate decisions to control the costs and to find a way to make it happen."

The share of college costs people are paying for with loans -- taken out by both parents and students-- also dropped to 22 percent for the 2013 to 2014 school year, down from 27  percent for the previous two school years,  the report found. As the graph below shows, most of that borrowing is being done by the student.

Ipsos Public Affairs, the market research company that conducted the survey for Sallie Mae,  polled 1,601 people over the phone between April 4 and May 15. Roughly half of them were parents of 18 to 24-year-old undergraduate students, and the other half were randomly selected 18 to 24-year-old undergraduate students.

College borrowing increased during the recession when some families saw their incomes cut by a job loss or savings depleted during the market crash. Many of those families may have been locked into their school choices when the market crashed, forcing them to stretch their budgets to afford the schools, Ducich says.

The survey showed that high income families, those earning more than $100,000 a year, paid for 51 percent of college expenses during the latest school year by using their own savings and income, up from 45 percent the year before. Lower income families, those earning less than $35,000 a year, saw the share of costs covered by grants and scholarships increase to 45 percent from 37 percent.

Of course, many graduates, and people who took out student loans but never earned their degrees, are still struggling with debt. A report released by the Federal Reserve Bank of New York found that the average student loan debt held by 25-year-olds increased to $20,926 in 2013 from $20,326 in 2012, double the average debt load from 2003.

Still, a separate study released this week shows that some people with college debt are being smarter about paying them back. Delinquencies for private student loans declined to their lowest level since 2008, according to a report released Tuesday by Measure One, a data firm that looked at private loans outstanding from the six largest private student lenders.

The share of private student loans in early delinquency, between 30 and 89 days late, fell to 2.97 percent in the first quarter of this year from 3.59 percent a year before. The share of loans that severely delinquent, or more than 90 days late, fell to 2.55 percent from 2.92 percent over the same time period. That may not be reflective of the greater student loan market, however, since private loans make up less than 8 percent of the $1.18 trillion student loan market.