You’d have no reason to think that Terry and Laura Truax of Chicago are in any way atypical college parents. Their son Sumner, 22, attends Lawrence University in Appleton, Wisconsin, where he’s double majoring in saxophone performance and music education.
Sumner is a talented jazz player in the Lux Quartet, but he didn’t have to land any college scholarships to pay his way through school, nor did his parents apply for any financial aid. Terry, an attorney, and Laura, a pastor, saved for college ever since their son was a toddler, meaning the $42,000 in annual tuition has been manageable — even as two more Truax teenagers plan to start college in the next two years. Terry is a partner at Jenner & Block LLC; Laura is senior pastor at LaSalle Street Church.
"Sumner has the gift to study and practice without the burden of earning to live," Laura Truax says. "We also had the distinct blessing of not dealing with changing employment situations. Terry’s been in the same job since graduating law school. In a real sense we’ve been blessed in unexplainable ways."
Yet in many aspects, the Truax family may represent a vanishing breed. A report released Tuesday by Sallie Mae, “How America Pays for College,” shows students attend college for increasingly practical reasons: better jobs and earning more money. The national study of 1,600 college students, now in its fourth year, also reveals that 90 percent of students strongly agree that college “is an investment in the future.” That’s up from 84 percent in 2010.
This comes as more families are filing the Free Application for Federal Student Aid (FAFSA), jumping from 72 percent in the 2010 report to 80 percent in the 2011 report. Most of the increase came from middle- and high-income families.
“For the first time we see parents and students are smart consumers,” says Sarah Ducich, senior vice president for public policy at Sallie Mae, which services government and private student loans and college savings plans. ”They paid 9 percent less for college than the year before.” In fact, virtually all families in the survey reported taking cost-savings measures, such as attending lower-cost colleges, living at home or going to school part time.
The bottom-line approach to higher education appears rooted in how the sour economy has forced families to rejigger their finances, says Clifford Young, managing director of Ipsos Public Affairs and a lead author of the study.
“In problematic economic times when things are going down the tubes, families try to cut down on spending and limit their exposure — and we’re seeing the same here as well,” Young says. For example, parents haven’t dipped into retirement plans as much as they did last year to fund college.
Parents are saving more and starting earlier, according to a second study released today. Fidelity Investments’ fifth annual College Savings Indicator study says parents are saving more in the preschool years — perhaps because fewer of them (48 percent, down from 70 percent in 2008) believe they’ll receive student loans for the full amount needed to pay for college. The survey of some 2,300 parents also reveealed more parents now make shared sacrifices to achieve college savings goals, despite financial pressures.
Yet more parents could take advantage of the American Opportunity Credit for the first four years of undergraduate study. Single taxpayers with modified adjusted gross incomes below $90,000 (and married couples below $180,000) can qualify for up to $2,500, while lower-income taxpayers may claim refunds up to $1,000, even if they owe no taxes. Still, less than half of low-income families apply. “It’s disappointing that 55 percent of them fail to take advantage of that,” Ducich says.
“The sooner parents make the commitment to fund college, the less painful it will be later,” says Neal Price, principal at Strategic Wealth Partners, LLC in Deerfield. “That’s more important than ever, given the findings in the Sallie Mae report.” Price’s firm creates plans based on reasonable expectations of rising costs and future earnings. Contributions can be made annually or monthly, but “it’s important to revisit the plan periodically to update costs, portfolio balances, savings capacity — and adjust the mix of investments, too.”
Of course, the flip-side of college finances has more parents and students paying attention to which majors pay the most. Payscale.com reports that of the 10 best undergraduate degrees by salary, seven have the word “engineering” in the title. Tops on the list is petroleum engineering, with a median starting salary of $97,900 — the same as the mid-career pay for someone who enters computer science (number nine on the list).
As for the worst paying undergrad majors for starting salary, you could choose theology ($35,600) or the lowest on the totem pole: child and family studies ($29,600, with a mid-career median of $40,500). The Truax clan might be relieved to learn that saxophone performance isn’t in the bottom 10, though elementary education ranks next to last ($32,400 with a $44,000 median).
Yet the success of the college experience depends largely on how you keep score. “We know the value of working hard, and so does Sumner,” Laura Truax says. “But we also know that there is a shining window called ‘formal education.’ We really want our kids to have the opportunity to experience that as freely as possible.”