A survey of families with college students provides a snapshot of how the coronavirus (COVID-19) pandemic has affected family budgets, with 56 percent of families reporting their budget has taken a hit.
The College Ave Student Loans survey was conducted in January before the pandemic hit and then again in June. While well over half of the families are dealing with the negative impact of the virus’s economic disruption, 72 percent say they are still able to help their children pay for college.
While nearly 6 in 10 families are dealing with negative effects to their finances, 58 percent of that group has been able to cope by dipping into savings. But the reliance on savings was not something they planned for.
Because of that, 43 percent said they delayed major purchases while 29 percent have relied on credit cards more than usual.
The economic impact is not only widespread but varied. Twenty-five percent of the households in the survey reported that at least one parent has been furloughed or has permanently lost a job. Twelve percent were forced to close a business, at least temporarily. Nearly 75 percent predicted the need to borrow at least $5,000 to get through the year.
In the five months between the surveys, parents have had to refocus their priorities. In particular, the June survey found that the approach to paying for college had changed.
The most recent survey found fewer families are relying on parental income, savings, and 529 accounts. Instead, they’re leaning more on grants and scholarships, student loans, and the student pitching in by working.
“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,” said Jean Chatzky, CEO of HerMoney, which conducted the survey. “Parents must keep in mind that while there are loans for college, there are no loans available for retirement.”
Take nothing for granted
Chatzky’s advice to students is to get a job. After all, generations of college students before them did it.
“For parents who might be feeling guilty about not contributing more to their child's education, don't,” Chatzky said. “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."
For families that have been fortunate enough to avoid negative economic impact, Chatzky says nothing should be taken for granted. Look for places where you might be able to make cuts to your budget on a monthly basis so you can put that money towards your college fund or college expenses.