How America Pays for College 2025

Education solutions company and responsible private lender Sallie Mae and research firm Ipsos® recently released its annual research report, How America Pays for College , providing  key insights into how current undergraduate students and parents of undergraduates view higher education and how they plan and pay for it. This industry-leading research considers education funding sources — from parent and student income and savings to scholarships, grants, and borrowed funds — while evaluating trends in college spending over time.

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Surveyed

1,000 parents of undergraduate students (ages 18–24)
1,000 undergraduate students (ages 18–24)

College Spending Increases

Undergraduate families reported spending an average of $30,837 on higher education for the academic year 2024-25 — a 9% increase from last year’s $28,409. This year’s spending is more in line with 2019–20, pre-pandemic, when families spent an average of $30,017 on college.

Families relied on income and savings to cover nearly half (48%) of costs, followed by scholarships and grants (27%), borrowing (23%), and contributions from family or friends (2%).

Families See Value in College but Remain Cost-Conscious

Nearly nine in ten families (89%) said college is a worthwhile investment, and 82% are willing to stretch their finances to ensure the best opportunities for their students. At the same time, 79% reported eliminating at least one school based on cost. It’s also worth noting that 47% reported paying less than the sticker price for college.

Families most often cited proximity to home (40%), affordability (39%), and specific academic program (39%) as top reasons for choosing a school. While 59% of families had a plan to pay for college before enrollment, just 38% considered starting salaries after graduation.

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Misconceptions About Scholarships Persist

Scholarships remain a valuable tool to help students and families access higher education. Families who received scholarships reported an average of $8,004 in funding, and 75% said scholarships made it possible for the student to attend college.

Still, misconceptions about scholarships discourage some families from applying. Nearly half of families (46%) believe scholarships are only for students with exceptional grades or abilities, 34% didn’t apply because they didn’t think there were scholarships for them, and 32% assumed it wasn’t worth applying if their family earned “too much.” Another 36% mistakenly thought students could only apply before freshman year.

Key Resource: Search for scholarships
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FAFSA® Completion Declines Despite Easier Form

In academic year 2024–25, the first year that the updated FAFSA was rolled out, 71% of families submitted the application, down from 74% in 2023–24, despite 64% saying the new form was easier to complete.

Confusion remains: only 21% of families knew the FAFSA opens in October.

Families are also looking for clearer, more consistent financial aid communications. Two-thirds (66%) support standardizing financial aid offers to make them easier to compare, suggesting strong demand for clearer, more transparent communication around college costs.

Key Resource: Fill out the FAFSA® with our step-by-step guide
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Access to Loans Leads Some Families to Reach for Higher-Priced Schools

Nearly half of families (48%) borrowed to help pay for college, and 72% of all families said they would rather borrow than miss out on attending.  Roughly six in 10 families (59%) said the availability of federal student loans has driven up college costs, and more than a third (35%) of families said loan availability led them to consider more expensive schools. In addition, two-thirds of families (67%) said they support limits on how much federal student loan debt students can take on.

Key takeaways:
This year’s How America Pays for College findings underscore the importance of early planning and starting the higher education journey with outcomes in mind—considering the full picture of education costs and career paths. It also further highlights that many families still miss critical steps that could improve both college affordability and post-graduation success. More broadly, it illustrates the need for more transparency related to college costs, stronger awareness of available aid, and clearer communication around borrowing.

Download the full How America Pays for College 2025 report at SallieMae.com.