Knowledge Snapshot: how families pay for college
- Families spent an average of $34,019 on college during the 2025-26 academic year.
- That amount was approximately 10% higher than the previous year.
- 49% came from family income and savings.
- 27% came from scholarships and grants.
- 22% came from parent and student borrowing.
- 2% came from gifts or contributions from relatives and friends.
- 47% of families reported borrowing to help cover college expenses.
Quick Answer
Families are paying for college through a combination of cash flow, savings, financial aid, and loans. The latest Sallie Mae survey shows that income and savings remain the largest funding source, but scholarships and grants covered more than one-quarter of costs. Borrowing covered nearly another quarter.
The important takeaway is that the average family is not relying on one solution. Families are assembling a financing plan from several sources, often while managing housing, food, transportation, retirement savings, and other household expenses.
The survey also shows why college planning cannot wait until senior year of high school. A 10% increase in average spending can create a meaningful cash-flow problem, especially when a family has multiple children approaching college at the same time.
What the Survey Found
Sallie Mae’s annual How America Pays for College study was conducted by Ipsos, which surveyed 1,000 undergraduate students ages 18 to 24 and 1,000 parents of traditional-age undergraduate students. The 2026 findings were reported by Higher Ed Dive on August 12, 2026.
Families reported average college spending of $34,019 for the 2025-26 academic year, compared with $30,837 the year before. That is an increase of $3,182, or roughly 10.3%.
Here is the reported breakdown:
| Payment source | Share of total costs | Approximate amount based on $34,019 |
|---|---|---|
| Family income and savings | 49% | $16,669 |
| Scholarships and grants | 27% | $9,185 |
| Parent and student borrowing | 22% | $7,484 |
| Gifts from relatives and friends | 2% | $680 |
These calculations are illustrations based on the survey percentages. Individual families may spend considerably more or less, depending on the school, location, housing choice, financial aid package, and number of enrolled students.
Editorial Context: The Sticker Price Is Not the Whole Price
A college’s published tuition is only one part of the financial picture. Families may also pay for housing, meals, books, transportation, technology, health insurance, and personal expenses.
Just as important, the published price is not always the amount a family ultimately pays. Grants and scholarships can reduce the net price substantially. The College Board’s Trends in College Pricing 2025 report estimated average net tuition and fees for first-time, full-time students at about $2,300 at public four-year colleges for in-state students and about $16,910 at private nonprofit four-year colleges. Those figures do not represent the full cost of attendance, including room and board.
This is why families should compare net price, not just tuition or a school’s advertised scholarship percentage.
A private college with a higher sticker price might provide enough institutional aid to cost less than an out-of-state public university. On the other hand, a large scholarship can be less valuable if it is difficult to renew or does not cover living expenses.
The Debt Implications Are Serious
The survey’s 22% borrowing figure deserves close attention. It represents the share of total college costs covered by borrowing across the surveyed families. It does not mean every family borrowed exactly 22% of its college bill.
Nearly half of families, 47%, said they borrowed during the 2025-26 academic year. For families that borrow, the financial consequences can extend well beyond graduation:
- Monthly loan payments can reduce early-career cash flow.
- Student debt can delay homeownership, business formation, or retirement saving.
- Parent loans may affect the parent’s ability to retire or help other children.
- Variable-rate private loans can become more expensive if interest rates rise.
- Borrowing for room, board, and lifestyle costs can be harder to justify than borrowing for a carefully selected degree program.
Higher Ed Dive also reported that new federal student lending limits began changing the borrowing landscape in July 2026. Families should not assume that Parent PLUS or other federal borrowing will always be available in the same amount or under the same terms.
Borrowing may be necessary, but it should fill a clearly defined gap. It should not be the default way to make an unaffordable college choice appear manageable.
Practical Guidance: How Families Can Lower the Bill
1. Complete the FAFSA every year
The Free Application for Federal Student Aid helps determine eligibility for federal grants, work-study, and federal student loans. States and colleges may also use FAFSA information for their own aid programs.
Do not assume your family earns too much to qualify. Eligibility can depend on income, assets, household size, the number of family members in college, and the school’s own aid policies.
Submit the FAFSA even if you are uncertain about eligibility. Missing the form can mean missing grants and scholarships that do not need to be repaid.
2. Compare financial aid offers carefully
When reviewing aid offers, separate each item into one of four categories:
- Grants and scholarships, which generally do not require repayment
- Work-study, which requires the student to work and earn wages
- Federal loans, which must be repaid
- Private loans, which may have fewer borrower protections
Ask whether scholarships renew automatically. Find out what grade point average or enrollment requirements apply. Also check whether the award covers only tuition or can be used for housing, meals, books, and other eligible costs.
3. Use a 529 plan strategically
A 529 plan can provide tax advantages when withdrawals are used for qualified education expenses. Families can use these accounts for eligible tuition, fees, books, supplies, and certain room-and-board costs.
Start with a sustainable contribution amount. A small automatic contribution made consistently can be more useful than an aggressive contribution that forces a family to rely on credit cards or neglect retirement savings.
For dependent students, a parent-owned 529 account is generally treated as a parent asset on the FAFSA. Because financial aid rules and tax laws can change, review current federal guidance before making large withdrawals or changing account ownership.
4. Treat college selection as a financial decision
A school’s reputation matters, but so do graduation rates, expected earnings, total debt, and the likelihood that the student will finish on time.
Families can reduce costs by considering:
- In-state public colleges
- Community college followed by a planned transfer
- Living at home when practical
- Advanced Placement, dual-enrollment, or other transferable credits
- Schools with strong merit aid
- Programs that allow students to graduate in fewer than four years
- Employer tuition assistance for working students
A lower-cost school is not automatically the better choice if it adds extra semesters or limits career opportunities. Compare the total expected cost of completing the program, not merely the annual tuition.
College planning should also fit within the family’s broader long-term wealth mindset. Paying for education is important, but parents should be cautious about sacrificing all retirement savings or taking on debt they cannot reasonably repay.
A Practical College Funding Order
There is no universal formula, but many families can use this sequence:
- Review the net price for each school.
- Apply for grants and scholarships.
- Use current income and available cash without damaging essential household reserves.
- Use 529 funds for qualified expenses.
- Consider federal student loans after reviewing the repayment obligation.
- Borrow privately only after comparing rates, fees, cosigner requirements, and protections.
- Revisit the plan each year as costs, aid, income, and family circumstances change.
The goal is not to avoid every dollar of debt. The goal is to keep education debt proportional to the student’s likely career income and the parent’s ability to repay without jeopardizing long-term financial security.
FAQs: how families pay for college
1. Does the 10% increase apply to every college?
No. The 10% figure is the increase in average family-reported college spending in the Sallie Mae and Ipsos survey. It is not a statement that every college raised tuition by 10%.
2. What does the $34,019 average include?
The reported amount includes tuition, fees, housing, and other college-related expenses paid by families during the 2025-26 academic year.
3. Are scholarships and grants taxable?
Some scholarships and grants are tax-free when used for qualified tuition, required fees, books, supplies, and equipment. Amounts used for nonqualified expenses or payment for services may receive different tax treatment. Review IRS Publication 970 for the applicable rules.
4. Should families save for college before paying off credit card debt?
High-interest credit card debt usually deserves priority because its interest rate can be substantially higher than the potential return on college savings. Families should also maintain an emergency reserve and continue appropriate retirement saving.
5. Can a 529 plan pay for room and board?
Generally, room and board can qualify when the student is enrolled at least half-time and the expenses meet applicable requirements. Keep records and review current IRS 529 guidance.
6. Does owning a 529 plan eliminate financial aid eligibility?
No. A 529 plan may affect the financial aid calculation, but it does not automatically eliminate eligibility. Treatment depends on ownership, the student’s dependency status, and the aid formula being used.
7. Is community college always cheaper?
Not necessarily. Tuition may be lower, but transportation, housing, transfer credits, and extra semesters can change the total cost. Confirm that credits will transfer into the intended degree program.
8. Should parents borrow for their child’s education?
Parents should consider their own income, retirement timeline, existing debt, and repayment ability. Parent borrowing can create a financial obligation that remains with the parent, regardless of the student’s employment outcome.
9. What is the difference between a grant and a loan?
A grant generally does not need to be repaid if the recipient meets the program requirements. A loan must be repaid, usually with interest.
10. How early should families begin college planning?
Families can begin with a basic savings and cost discussion several years before enrollment. By high school, students should compare likely college costs, aid opportunities, academic requirements, and career outcomes.
Bottom Line
The latest survey offers a useful reality check. Families covered almost half of college costs from income and savings, secured more than one-quarter through scholarships and grants, and financed nearly another quarter with borrowing.
That mix can work, but it leaves little room for poor planning. Start with the net price, complete the FAFSA, search broadly for scholarships, use 529 savings thoughtfully, and compare the long-term value of each college option. A degree can improve career opportunities, but the financing plan should improve a family’s future rather than compromise it.
