Caps on student borrowing could also play into how America pays for college

Most families don't pay the full sticker price for college.

Nothing yet has stopped the inexorable rise in college costs, but there may be signs that government regulations, financial-aid rule changes and family behaviors could start to curb tuition inflation.

For the last 19 years, student-loan lender Sallie Mae has commissioned a study on how families marshal all the economic forces at their disposal to pay for college. The categories haven't changed much over the years, but the average yearly cost of attendance has nearly doubled along with the advertised sticker prices. But we may be starting a new era, according to Rick Castellano, a vice president at Sallie Mae, who has been shepherding the company's data collection since 2014. "I really think it's a baseline year. We might see shifts going forward," he said.

The latest Sallie Mae "How America Pays for College" survey, which covers the 2025-2026 academic year, shows the average family spends $34,019 on the cost of attendance for college, which includes tuition, books and all other out-of-pocket expenses for the various types of postsecondary education like private four-year colleges, public universities and two-year programs. That's up 10% from the year prior. Just over half pay the full sticker price, which can be over $100,000 at elite four-year institutions.

In 2008, when Sallie Mae first started tabulating costs, institutions like NYU and Harvard were charging upward of $50,000 on their brochures, while public schools and two-year programs were charging proportionally less. On average, family costs averaged just under $15,000 across all the types of schools, Sallie Mae found.

In all years, where families have gotten the money has remained fairly consistent: scholarships and grants, parent and student income, savings, borrowing and gifts. But the percentages shift with economic realities. During recessionary times, parent contributions dip and borrowing increases. Today, scholarships and grants cover the largest portion, with more schools offering full-tuition funding for families making under a certain income cap, like $150,000.

The portion that families had to pay out of their own funds was $16,624 last year, while scholarships and grants covered 27% and borrowing accounted for 22%.

These proportions may shift in the future because of new caps on borrowing, according to Castellano. Most of the rules that went into effect in July apply to graduate-school funding, but undergraduate loans now count toward a federal lifetime borrowing limit. And future graduate-school costs figure into many families' decisions about which undergraduate program to choose for affordability.

Parents and students are all for the caps, according to Sallie Mae's survey. Nearly 60% said they believed that unlimited borrowing contributed at least in part to rising college costs. The argument goes that if the money is there to borrow, colleges raise their prices accordingly. Some 53% said they thought colleges should lower costs accordingly, and 38% thought they should offer more scholarships.

How to lower your costs

The Sallie Mae study pointed toward several areas where families can adjust their habits and perhaps reduce the amount of money they need to spend out of their paychecks in future years.

One area Castellano said he would be watching is how the Trump Accounts for newborns and young children would help families - either by boosting their savings or bringing attention to the issue and encouraging them to save in other vehicles, like tax-advantaged 529 college savings plans.

Last year, 34% of families drew from 529 plans to help pay for college, up from 32% the year prior. This signals a positive trend of planning and smart saving behavior, said Castellano. When he was first involved in the Sallie Mae surveys, the participation rate was roughly 15% to 18%; in the first iterations, it was 5%.

Planning helps families because it allows them time to save rather than use funds out of their regular cash flow. Saving in a tax-advantaged 529 means the contributed funds grow tax-free and are walled away from other regular family savings. Distributions from grandparent-owned 529s used to count as student income on the federal student aid form (FAFSA), but since 2023, no longer do. Castellano said Sallie Mae would be watching in the next few years to see if that makes an impact.

Another area where families can help themselves is to ask for aid, which means filling out the FAFSA and any other required forms, and then, if it's not enough, to ask for more. FAFSA participation is at 74%, but aid appeals are only at 33%. Of those who appealed, 70% got more money, while only 16% got a "no" answer.

"That first offer might not be the final offer, and having those conversations and comparing offers can help drive costs as well," said Castellano. "That little bit of homework and outreach can go a long way to get a few more dollars. The last thing you want to do is leave free money on the table - and even more so just because you haven't asked."