New AMS Study of Parents of Incoming Freshmen Reveals Their Expectations and Perceptions of Financial Aid

SWANSEA, Mass., Jan. 26 /PRNewswire/ -- Academic Management Services (AMS), a leading education finance company, today announced findings from a new survey of parents of college-bound freshmen. The study, conducted by Aspen Media and Market Research, found that nearly 60 percent of families -- and 71 percent of those with less than $50,000 in annual income -- began researching the best way to pay for their child's tuition bill only after the child entered high school. The study also found that more parents ranked location of the school, rather than cost, as the top priority when their child was applying to college.

Despite the late start to their how-to-pay-for-college research, families are realistic about the amount of free money and loans they will get to pay for college. The percentage of the bill that parents anticipated would be covered by scholarships and grants versus what their child actually received was largely similar: nearly 40 percent of all respondents anticipated that scholarships or grants would cover between 41 and 100 percent of their bill; this was the actual case for 37 percent of respondents. Lower-income parents realistically expected to receive more gift aid than their higher-income peers.

Expectations regarding student loans were also typically on target. Most parents expected loans to cover a relatively small percentage of the bill. More than half -- 56 percent -- of all respondents said that they used loans to cover between zero and 10 percent of their total bill.

"Reaching out to talk to families directly about their college financing experience helps us understand their needs more fully," said AMS President Judith Grassi. "As we begin another financial aid application season, every effort must be made to help families understand the importance of getting an early start on the process of applying for aid."

Among other findings, the study revealed: * Across income groups, more than three-quarters of respondents discussed the tuition bill with their child two or more times during the summer before it was due. * Borrowing to finance higher education is a responsibility shouldered by both parents and students. When asked who borrowed more to pay the tuition bill -- parents or their students -- the results were equal: 29 percent of all respondents said the parents borrowed more, and 29 percent said the students borrowed more. * While 41 percent of all respondents reported that their child took out a federal Stafford loan, just 13 percent reported taking out a federal PLUS loan. Stafford loans are available to undergraduate and graduate students; PLUS loans are available to parents of dependent undergraduate students. These loans are the two lowest-cost financing options available to families. * Twenty-one percent reported using a monthly tuition payment plan to pay for college. Tuition payment programs allow students and families to pay for tuition in interest-free monthly installments. Methodology

The AMS 2005 College-Bound Freshman Survey was conducted via telephone interviews from September 6-12, 2005 using CATI software to assure appropriate sample management and data collection accuracy. A total of 400 surveys were completed with an "adult head of household" in homes with one or more family members entering college as freshman in 2005. Overall results have a margin of error of +/- 5 percent at 95 percent confidence level and +/- 4.2 percent at the 90 percent confidence level.

Academic Management Services Corp. (AMS) is a top-20 originator in the Federal Family Education Loan Program (FFELP) and a leading provider of Outreach Counseling services that help families resolve their tuition bills. Since 1970, AMS has counseled more than 4.5 million families to "budget first then borrow wisely," using its comprehensive suite of payment plan, federal and private loan products. AMS has been a wholly owned subsidiary of SLM Corporation , commonly known as Sallie Mae, since November 2003. Sallie Mae is the nation's No. 1 paying-for-college company, managing nearly $123 billion in student loans for 9 million borrowers. To learn more about AMS, visit http://www.amsweb.com/.

Aspen Media and Market Research, located in Boulder, Colorado, offers a full range of customized data collection services that start and end with the clients. Every project begins with a team of specialists and a host of other Aspen tools, including proprietary pre-collection services, real-time interview monitoring, two large U.S. telephone call centers, Aspen's AccuDa data cleaning process, customized status reports and final reports and data output provided in virtually any software format. To learn more about Aspen, visit http://www.aspeninformation.com/.

Key Findings

Too often, parents-particularly lower-income parents-start their paying- for-college research late and with limited information.

* 57 percent of all respondents indicated that they began researching the best way to pay for their child's tuition bill only after the child entered high school. That figure jumped to 71 percent for the lowest- income group families (those who made less than $50,000 per year). Among respondents in the highest income group ($75,000 or more per year), just 48 percent began college payment research in the high school years. * Only 11 percent of all respondents began when the child was born and another 12 percent began when the child was in elementary school.

When it comes to applying to college, it's all about location, location, location.

* Overall, parents' top priority when their child was applying for college was the location of the school (28 percent). Scholarship availability and admission ranking also ranked high (20 percent and 18 percent, respectively); school cost was listed as a top priority for only 15 percent of respondents. * Interestingly, this trend held true across income categories. -- In the middle-income bracket, location ranked highest in terms of priority (30 percent), followed by scholarship availability (22 percent). Cost ranked last (14 percent). -- Among the lowest income respondents, admission ranking rated lowest (10 percent) in terms of family priority; school cost was the next- to-lowest priority, with 20 percent. Paying for college is a family affair. * More than 76 percent of all respondents discussed the tuition bill with their families more than twice during the summer before it was due; of those, 24 percent discussed it at least four to seven times, and 28 percent discussed it at least eight to 10 times. * 56 percent of all respondents said that just 0-10 percent of their total bill was actually covered by loans, but researchers found that borrowing to finance higher education is a responsibility shouldered by both parents and students. * When asked who borrowed more to pay the tuition bill -- parents or their students -- the results among all respondents were remarkably equal: 29 percent said the parents borrowed more, and 29 percent said the students did.

Families have realistic expectations about the amount of free money they will get to pay for college.

* The study finds that overall, the percentage of the bill that parents anticipated would be covered by scholarships and grants versus what they accepted and received was, in large part, the same: 38 percent anticipated that scholarships or grants would cover between 41 percent and 100 percent of their bill; this was the case for 36 percent of the respondents. * Of those dealing with the difference between expectations and actual scholarships and grants received by their student, 52 percent covered the difference by using savings or 401Ks, paying out of pocket, or budgeting their finances and living on less.

Families are borrowing in moderation, but there seems to be a lack of awareness on financing and payment options.

* More than half of parents (56 percent) in the lower income group reported paying a very small portion of their total bill (10 percent or less) through income or savings as opposed to loans, scholarships or grants, whereas about one-third of upper-income parents paid the vast majority of their bill (81 to 100 percent) through income or savings. * Only 22 percent of all respondents were "very familiar" with monthly tuition payment program that allow them to pay for tuition in interest- free monthly installments; roughly the same number -- 21 percent -- reported using a monthly tuition payment plan. * 41 percent said their student took out a federal Stafford loan; just 13 percent took out a federal PLUS loan for parents. Background * The AMS 2005 College-Bound Freshman Survey was conducted via telephone interviews from September 6-12, 2005 using CATI software to assure appropriate sample management and data collection accuracy. * A total of 400 surveys were completed with an "adult head of household" in homes with one or more family members entering college as freshman in 2005. * Overall results have a margin of error of +/- 5 percent at 95 percent confidence level and +/- 4.2 percent at the 90 percent confidence level.

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