Survey Finds 6 out of 10 Families’ Budgets Affected by the COVID-19 Pandemic, Including Plans to Fund College

The COVID-19 pandemic has created an unpredictable financial environment for many families. For 6 out of 10, that means changes to their household budget, according to the latest College Ave Student Loans survey of 1,141 parents of college students conducted by Barnes & Noble College Insights^SM. Despite the unexpected impacts, the majority (72%) of parents who plan to help pay for their child’s education are still confident about their overall payment plan.

College Ave surveyed parents in January and again this June with personal finance site HerMoney.com to get a snapshot of how the pandemic has affected college financing plans. The survey found that while the approach to paying for college has changed since the beginning of the year, families still deeply value a higher education degree.

Impact of the pandemic on family finances

More than half of families (56%) said the pandemic has negatively affected their finances. Of those, 58% have had to dip into their savings more than expected, 43% delayed big spending purchases and 29% have relied more on credit cards. Many families have faced job uncertainty – 25% report a parent in the house has been furloughed, lost a job (14%) or has had to close a business temporarily or permanently (12%). Of those who will need to borrow more than previously planned as a result of the pandemic, nearly 3 in 4 (74%) said they will need to borrow at least $5,000 or more this year.

Changes in how families plan to cover college costs

The latest survey found the overwhelming majority of parents (92%) agree with the statement that a college degree is important for their child. Perhaps that’s why in June, and during difficult financial times, more parents say they are willing to help their child pay for college (95% vs. 83% in January) and invest in their child’s degree.

In the five-month timeframe between the surveys, the June survey also found the approach to paying for college changed. The recent survey found less families are relying on parental income, savings, and 529 accounts, and instead, are leaning more on grants and scholarships, student loans and the child pitching in by working.

Less common financial strategies used by families include money from a retirement account, personal loans, and credit cards. Overall, the survey highlights that there is no “one-size-fits-all” approach to financing a college education.

“During these unprecedented times, families who have children headed to college will need to come together and have open and honest conversations about the road ahead. Parents must keep in mind that while there are loans for college, there are no loans available for retirement. Anything they’re able to offer their child toward the cost of college will be welcome,” said Jean Chatzky, CEO of HerMoney. “Also, students must understand that working through college may be their best path forward, and they should leave no stone unturned when it comes to searching for and applying for scholarships and grants. For parents who might be feeling guilty about not contributing more to their child’s education, don’t. Understand that it’s okay for your child to work and take out an appropriate amount of loans, and you can help them guide them through these important first steps into adulthood.”

Tips for how to cover college costs during uncertain times include:

• If you haven’t experienced a change in income, look to see where you might be able to make cuts to your budget on a monthly basis, and put that money towards your college fund, or college expenses.
• If circumstances have dictated that you won’t be able to continue to save for college or contribute to college costs, start looking into student jobs that might appeal to your child, student loans, as well as grants and scholarships. Doing all this as early as possible will help erase some question marks, and make everyone feel more confident about the future.
• In the years to come, more jobs than ever will be able to be done remotely, and to make ends meet, both students and parents may want to consider a remote side-gig, doing things like customer service, graphic design, social media work, and more. Even an additional $100 a month can be a welcome addition to any budget, and can mean a reduction in the amount of student loans taken out.
• While some sticker prices for college and college activities are set in stone, some things can be negotiated, and in many cases, cheaper prices are available. For example, students who receive a scholarship offer for one year of tuition can request that their offer is extended, and in many cases, online textbooks are cheaper than their hardbound counterparts. There are myriad ways to keep it frugal — you just have to keep an eye out, and never be afraid to ask.

“The pandemic has created financial uncertainty for many families,” said Joe DePaulo, Co-Founder and CEO of College Ave Student Loans. “However, the survey also points to the resilience of families and their determination.  Even during difficult times, families believe in – and prioritize – finding a path to a college degree as they know a higher education can provide a better future for their children.”