TIME College

Parents Are Shelling Out More Money For Kids to Attend College

Proposed Budget Cuts Threaten Funding For California Universities
David McNew—Getty Images Students go about their business at University of California, Los Angeles (UCLA).

More financing from the Bank of Mom and Dad

Parents opened their wallets more generously in the 2014-2015 school year, a report shows, reclaiming their place as the primary source of college funding for the first time since 2010.

Parental income and savings now cover 32% of college costs, surpassing scholarships and grants as the largest share of college funding, according to the How American Pays for College 2015 survey, released by Sallie Mae. The percentage of college funding contributed by parents’ savings and income had hovered at and below 30% since it nosedived from 37% in 2010.

Parents are paying more for college in part because it’s costing more. The amount that families spent on college rose to an average of $24,164 this year — a 16% gain from $20,882 in 2014.

But the increased wallet-opening isn’t just linked to rising tuition. Parents are less worried about a volatile economy impacting their ability to pay for college. Only 17% of parents reported extreme concern that losing a job would impact their income, compared to 23% in 2014. In 2015, 62% of families eliminated potential colleges because of the cost, down from 68% in 2014 and the lowest percentage since 2009. The financial worries of parents — which were at record levels in 2010 as loan rates rose and the value of savings diminished — had eased significantly by 2015. Whereas a quarter of parents in 2010 recorded “extreme worry” about college costs because they were concerned about the value of their homes, only 6% said the same in 2015.

In addition to parental income and savings, 30% of college funding, on average, came from grants and scholarships in 2015, while 16% came from student borrowing, 11% from student income and savings, 6% from parental borrowing, and 5% from friends and family.

Despite the widespread coverage of student loan burdens, the majority of families did not take out loans to pay for college. When they did, the students were the ones who signed the dotted line three-quarters of the time. Families with students enrolled at private four-year colleges were far more likely to borrow (with 56% taking out loans) than those in four-year, or two-year public schools, where 43% and 22% of families took out loans, respectively.

TIME Research

Rising Birth Rates a Good Sign for the Economy

Large Group of Babies
Getty Images

First increase since the recession

The number of children born in the U.S. increased in 2014 for the first time since the Great Recession, a sign that some women may be feeling financially stable enough to start a family.

The National Center for Health Statistics released a study Wednesday showing that both the number of births and the fertility rate in the U.S. increased by 1% in 2014, the first rise since 2007, when both demographic markers began dropping.

Last year, the U.S. birth rate had fallen to a 15-year low, according to NCHS data, with the number of births decreasing from 4.3 million in 2007 to 3.9 million in 2013, a 9% drop. Based on 2007 birth rates, University of New Hampshire demographer Ken Johnson estimates that there were 2.3 million fewer babies born between 2008 and 2013 than there would have been if the birth rate remained stable.

The falling birth rate has been one of the indirect consequences of the recession and of particular concern for demographers. Low birth rates over the long term, barring an influx of immigrants, can mean a population decline that leads to a smaller tax base and fewer people to financially support programs like Social Security and Medicare as the population ages.

Demographers have been trying to determine whether the economy forced women to merely delay childbirth or forego starting a family altogether. The latest numbers, while preliminary, suggest that women may just have been delaying.

The birth rate for women aged 30-34, many of whom were graduating from college and looking for jobs when the recession hit, rose 3% in 2014 and has steadily increased since 2011. The rate for women aged 35-39 increased by 3% while the rate for those aged 40-44 rose 2%.

For women aged 20-24, however, the birth rate decreased by 2%, and it remained steady for those aged 25-29, suggesting that many millennials are still putting off starting a family.

“We won’t know how significant this is unless it continues for the next few years,” said William Frey, a demographer at the Brookings Institution, of the overall rise in birth rates. “But it’s a glimmer of hope that demographic responses are reacting to an improving economy.”

MONEY Housing Market

Renting a Home Could Become the New Normal

Residential Real Estate As City Becomes The Least Affordable U.S. Housing Market
Bloomberg—Bloomberg via Getty Images Pedestrians walk past a "For Rent" sign that is displayed outside of an apartment building in the Mission district of San Francisco, California, U.S., on Thursday, May 7, 2015.

Homeownership rates have been falling for the last decade.

Is renting a home the new American dream? A report by the Urban Institute projects that even after the housing crash and the Great Recession are a distant memory, homeownership rates in America will continue to decline.

The report estimates that between 2010 and 2030, the majority (59%) of the 22 million new households that will form will rent, while just 41% will buy their homes.

The homeownership rate has been falling since 2006, when the housing bubble began pricing out many would-be homeowners — and the recession furthered that trend. In 2006, the homeownership rate was 67.3%; it now sits at 63.6%, even lower than it was in 1990, according the U.S. Census’ most recent American Community Survey.

But even the economic recovery won’t reverse that trend, according to the Urban Institute. It offers six reasons:

  1. Wages. Real wages have declined among adults ages 25 to 34 since 1996. “Even for young adults with good jobs, low vacancy rates and high rents make it more difficult to save,” the report says.
  2. Student loan debt. Total outstanding debt was about $300 billion in 2003; now it is over $1.3 trillion. Long-term debt makes additional long-term debt less appealing.
  3. Delayed household formation. Both women and men are waiting four years longer before marriage than in 1980. “Because of the delayed marriage and childbearing, homeownership is apt to occur later. At a result, people will spend less of their lives as homeowners, placing a drag on the homeownership rate,” according to the Urban Institute.
  4. Lingering effects of the recession. Roughly 7.5 million Americans lost their homes during the recession; most will have a hard time buying a new one, dragging down the homeownership rate.
  5. They’re not that into homebuying. More Americans are consciously choosing to rent over buy. One study looked at “prime candidates” — married couples earning at least $95,000 annually who have at least one child. “Even for this group, after controlling for race and ethnicity, the homeownership rate declined from 87.3% in 2000 to 80.6% in 2012,” the report says.
  6. Higher borrowing standards. The report says that lenders are still “historically tight,” particularly among borrowers with lower credit scores.

The report also considered changing demographics — a majority of new households formed in the U.S. during the next two decades will be non-white — and while those groups traditionally have lower homeownership rates, the Urban Institute found that will not contribute significantly to overall homeownership rates in the future. That story is a mixed bag, however.

“For at least the next 15 years, whether the economy grows slowly or quickly, the homeownership rate for African Americans will decrease while the rate for Hispanics will increase,” the report found. “More than 50 percent of the 9 million new owners between 2010 and 2030 will be Hispanic, nearly one-third will be other races or ethnicities, 11 percent will be African American, and only 7 percent will be white.”

The shift from owning to renting means that many more rental units should be built, the Urban Institute says.

“This change will create a surge in rental demand from now until 2030 that we are unprepared to meet,” it says.

It also suggests that mortgage lending standards be relaxed to nudge more would-be renters to buy their homes.

That conclusion doesn’t sit well with everyone, however.

Logan Mohtashami, a California-based loan officer, says the notion that lending standards are tight is a myth.

“There remain a number of highly respected housing ‘gurus’ who continue to profess that it is unfairly tight lending standards, not the lack of qualified buyers that are suppressing a housing recovery. The difference is not academic,” he says. “A quick review of the requirements for some of mortgage loans available may surprise you.”

VA loans require no down payment, for example, he notes. And buyers can get other mortgages with credit scores as low as 560, with 50% debt-to-income ratios, or down payments as low as 3%.

“At this point all you can do is bring back 0% down loans and stated income loans for wage earners,” said. “Look who is really pushing the tight lending thesis. People in New York, D.C., San Francisco. What I call economic bubble cities. Main Street America gets this thesis I am saying.”

Read next: Should You DIY These 5 Home Improvements?

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MONEY Opinion

How History Can Mess With Your Investing Strategy

Traders work on the floor of the New York Stock Exchange March 2, 2009.
Shannon Stapleton—Reuters Traders work on the floor of the New York Stock Exchange March 2, 2009.

People get history wrong when they look back at specific events and expect them to repeat in the future.

Do you read history? Believe almost all of it? Use it as a guide to the future?

Me too. But let’s consider something. Take these two statements:

“11 million jobs have been created since 2009. The stock market has tripled. The unemployment rate nearly cut in half. The U.S. economy has enjoyed a strong recovery under President Obama.”

“The recovery since 2009 has been one of the weakest on record. The national debt has ballooned. Wages are stagnant. Millions of Americans have given up looking for work. The economy has been a disappointment under President Obama.

Both of these statements are true. They are both history. Which one is right?

It’s a weird question, because history is supposed to be objective. There’s only supposed to be one “right.”

But that’s almost never the case, especially when an emotional topic like your opinion of the president is included. Everyone chooses the version of history that fits what they want to believe, which tends to be a reflection of how they were raised, which is different for everybody. We do this with the economy, the stock market, politics — everything.

It can make history dangerous. What starts as an honest attempt to objectively study the past quickly becomes a field day of confirming your existing beliefs. This is like steroids for inflating your confidence and puts you on a path to misguided, regrettable decisions. (Misguided and regrettable decisions being the one thing everyone agrees history is filled with).

In his book Why Don’t We Learn From History?, B.H. Liddell Hart wrote:

[History] cannot be interpreted without the aid of imagination and intuition. The sheer quantity of evidence is so overwhelming that selection is inevitable. Where there is selection there is art.

Those who read history tend to look for what proves them right and confirms their personal opinions. They defend loyalties. They read with a purpose to affirm or to attack. They resist inconvenient truth since everyone wants to be on the side of the angels. Just as we start wars to end all wars.

I see this all the time in investing. The amount of investing data is incomprehensible and growing by the day. Anyone can think up a narrative, then sift through mountains of historical data to find examples backing it up.

Think stocks are expensive? History agrees. Think stocks are cheap? History agrees. Think tax cuts spur economic growth? History agrees. Think tax cuts don’t spur economic growth? History agrees. History shows that raising interest rates is both good and bad for stocks. It proves that buy-and-hold investing is the best and the worst strategy. In the age of big data, no idea is so absurd that a good spreadsheet can’t make it look right.

And a lot of the historical events investors try to study — recessions, bear markets, bouts of hyperinflation — are rare enough that we don’t have many episodes to draw conclusions from.

To know a lot about recessions, for example, you’d ideally want hundreds of examples to study. But there have only been 33 recessions in the last 150 years. And the data we have on most of them is dubious. Estimates on how much the economy contracted during the 1920 recession range from 2.4% to 6.9%, which is the difference between a moderate recession and a near-depression. In the last 50 years, when data is more reliable, there have been just seven U.S. recessions. So how are we supposed to take seriously any historical statistic about the average recession? How long the average recession lasts? How frequently they occur? How high unemployment goes? We’re talking about something that has occurred just seven times in the last half-century.

So, what good does looking at history do us?

A lot, in fact. You just can’t take it too far.

People get history wrong when they look back at specific events and expect them to repeat in the future. It’s so easy to underestimate how much past events were caused by trivia and accident rather than trends that should repeat in some clean way. Investors who have unshakable faith in markets reverting back to specific historical averages have some of the worst track records you can imagine. This goes into overdrive when you acknowledge the subjectiveness of historical recordkeeping. “I have written too much history to believe in it,” historian Henry Adams once said.

But history can be great at teaching broad, unspecific lessons. Here are five.

Something usually occurs to keep good news and bad news from going on forever.Recessions end because excess gets washed away; booms end because everything gets priced in. Most people wake up every morning wanting to make the world a better place, but psychopaths, idiots, charlatans, and quacks are persuasive enough to occasionally shake things up.

Unsustainable things last longer than you think. Every war was supposed to be over in a month, every boom was surely going to pop any day, and every round of Federal Reserve money printing meant high inflation right around the corner. In reality, things that look unsustainable can last for years or decades longer than seems reasonable. “I was right, just early,” are famous last words, and indistinguishable from “wrong”.

Normal things change faster than you expect. “History doesn’t crawl,” Nassim Taleb writes, “it leaps.” Things “go from fracture to fracture, with a few vibrations in between. Yet we like to believe in the predictable, small incremental progression.”

Irrationality spreads at the worst possible times. Most people can keep their heads straight when things are calm. It’s when things get exciting — bull markets, bear markets, wars, recessions, panics — that emotions take over. Importantly, decisions during made during those crazy moments are the most important decisions you make over the long run.

Nothing is stronger than self-interest. When someone in charge of lots of people gains the most by promoting their own interests, you get inefficiencies at best, disaster more often. What everyone knows is the truth or the right thing to do is ignored because a few people can get ahead doing something else. This describes most organizations.

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TIME Economy

Most Americans Say Wealth Inequality Is a Huge Issue

McDonalds Holds National Hiring Day To Add 50,000 Employees
Justin Sullivan—Getty Images A McDonald's employee prepares an order during a one-day hiring event at a McDonald's restaurant on April 19, 2011 in San Francisco, California.

Expect it to be a 2016 campaign theme

An improving economy has done little to distract Americans from an issue sure to be a the forefront of the 2016 presidential contest: inequality.

A new poll by The New York Times and CBS News found that a majority of respondents—66%—said wealth should be more evenly distributed. 67% percent of respondents said the gap between the rich and the poor was getting larger, and 65% said the divide needs to be addressed now.

A smaller chunk of respondents—57%—said the government should do more to close the gap between rich and poor, though they split sharply along partisan lines with one-third of Republicans supporting a more active government role, versus eight in 10 Democrats, according to the Times. When asked if they wanted to raise taxes on Americans who earn more than $1 million, 68% said they were in favor of such hikes.

Democrats are trying to capitalize on Americans’ belief that the economic recovery has been uneven, benefiting high-earners the most. But inequality is far from a partisan issue. The Times reports inequality is a concern for almost half of Republicans and two-thirds of independents, which suggests it’s an issue that will persist through and beyond this election cycle. Considering these findings, it’s no surprise that both Democratic and Republican politicians are exercising their populist muscles.

TIME Economy

The Left’s Opening Gambit for 2016 Is All About Your Paycheck

Elizabeth Warren
Cliff Owen—AP Elizabeth Warren Sen. Elizabeth Warren ponders the nation's problems at a Senate Banking Committee hearing on anti-money laundering on March 7, 2013.

The unifying value for progressives in 2016? Wages, if leaders like Elizabeth Warren and Richard Trumka have anything to say about it

See correction below.

If unemployment and slow growth were the central economic issues of the last presidential election cycle, wage stagnation and inequality are shaping up to be the focal point of 2016. The U.S. is now solidly in recovery, posting 5 % GDP growth in the third quarter of last year. But growth isn’t necessarily the same as shared prosperity. Inflation-adjusted middle class incomes have actually gone down for the last decade, something even the most rabid free market advocates won’t quarrel with statistically. And working class wages have been stagnant for much longer than that. (On balance, men with only high school degrees haven’t gotten a raise since 1968.) In an economy made up of 70 % consumer spending, that’s obviously an economic problem: no spending equals no business investment equals no jobs equals no spending…you get the picture. But inequality is increasingly taking on social and cultural dimensions, evident in everything from the debate over immigration to the killings that have rocked Ferguson and New York.

Put simply, chronically flat wages are no longer just about the lifestyle divide between the 1 % and everyone else. They’ve become an issue of social justice, democracy, and stability.

The question is, who has an answer to the problem? Liberals will be taking a first crack at it this Wednesday (Jan. 7) at the AFL-CIO-sponsored summit on Raising Wages. As Massachusetts senator Elizabeth Warren, who’ll be giving the keynote address, told me in an exclusive interview in advance of the summit, “Things are getting better, yes, but only for some. Families are working harder, but not doing better. And they feel the game is rigged against them–and guess what–it is!”

In her speech, Warren will be talking through numbers from a database compiled by French academic Thomas Piketty (author of the best-selling Capital in the 21st Century) showing that while 90 % of the workers in the US shared 70 % of all new income between the 1930s and 1970s, things started to change in the 1980s, with the 90 % capturing essentially zero percent of all new income since then.

Funny enough, that’s around that time that the laissez faire economic policies advocated by President Reagan, and later, President Clinton’s administration, took off. Former Treasury Secretary Bob Rubin was the one who lobbied Clinton to roll back the Depression-era Glass-Steagall banking regulation that many (like Warren) believe was a key factor in the financial crisis (which, in and of itself, greatly exacerbated inequality, particularly for African American and Latino families). He and other Clinton advisors like Larry Summers also crafted changes in tax policy that allowed for the growth of stock options as the main form of corporate compensation, a trend that Piketty, Nobel laureate and former Clinton advisor Joseph Stiglitz and many other economists believe has been a reason for growing inequality. I asked Warren if she blamed such Rubinesque policies for our current wage stagnation problem. “I’d lay it right at the feet of trickle down economics, yes. We’ve tried that experiment for 35 years and it hasn’t worked.”

Which will be an interesting challenge for Hillary Clinton, the presumed Democratic front-runner for 2016, and those in her orbit to overcome. Neera Tanden, the policy director for Clinton’s 2008 presidential campaign, now head of the left wing think tank Center for American Progress, will also be speaking at the AFL-CIO summit and, next week, CAP will be debuting a brand new report on what can be done about wage stagnation. The report was spearheaded by none other than Larry Summers. When I mention to Tanden that many people might not associate Summers with “inclusive growth,” she insists that the document is “quite progressive” and that “he’s been right there with it.” This echoes what I’ve heard from other economic insiders about Summers shift away from his historic (some might say infamous) work in financial alchemy and toward more populist concerns like worker wages.

If this conversion has in fact taken place it could be described as either Biblical, or, given current public sentiment around Wall Street, opportunistic. CAP’s report will focus on what the US can learn from other developed countries like Australia, Canada, and Sweden, which have managed to keep worker wages relatively high in the face of globalization and technological disruption. It’s worth noting that they also have much more sensibly managed financial systems than the US.

One thing that all the VIP summit participants, including AFL-CIO president Richard Trumka, seem to agree on: the US is the outlier in developed economies in viewing workers as “costs” rather than “assets to be invested,” as Trumka puts it. It’s a philosophy that underscores America’s focus on the rights and profits of investors to the exclusion of everyone and everything else. It’s a mythology that will be under fire in 2016, as workers, business people, and politicians alike are beginning to question the viability of a system that encourages inequality-bolstering share buybacks rather than real economy investment, and a chase for quarterly profits over what’s best for the economy–and society—at large. On that note, Trumka will be announcing some big policy steps to put the wage issue front and center in the 2016 election conversation. “We want to establish raising wages as the key, unifying progressive value,” he says. “We want wages to be what ties all the pieces of economic and social justice together.” Sounds like a rallying cry to me.

Correction: A previous version of this story incorrectly stated the date of Hillary Clinton’s presidential campaign.

TIME Health Care

Utah’s Abortion Rate Is at Its Lowest Ever

Restrictive abortion laws, economics and the increased availability of contraceptives could all be behind the trend

Utah’s abortion rate has dropped to its lowest ever since the state began keeping records in 1975.

The number of women in Utah who had an abortion in 2013 was 2,893, that is 4.6 women in every 1,000, the Salt Lake Tribune reports.

Utah’s abortion statistics have been in decline from a high of 11.1 per 1,000 in 1980.

Several reasons could be behind the downward trend. There are more restrictive abortion laws in the state — including one that imposes a waiting period of 72 hours.

But Laurie Baksh from Utah’s Department of Health cites economics as a possible reason for lower abortions, saying people are thinking about the financial realities of raising a child.

[Salt Lake Tribune]

TIME Treasury

U.S. Sells Off Last Major TARP Investment, 6 Years On

U.S. taxpayers made around $2.4 billion in the Ally investment

The U.S. has finally sold off its remaining major investment in the Troubled Asset Relief Program, six years after beginning to bail out auto companies, banks and financial institutions in the depths of the Great Recession.

The Treasury Department announced Friday that it will sell its remaining stake in Ally, the former financing division of General Motors, capping the end of its last major TARP investment and the auto rescue program.

Treasury touted that selling the nearly 55 million shares netted $1.3 billion for taxpayers, and $19.6 billion overall after spending $17.2 billion on Ally. However, the government’s overall losses on the $85 billion auto industry bailout were about $10 billion, the Detroit News reports.

After former President George W. Bush signed TARP into law in October 2008, the U.S. poured hundreds of billions of dollars to stabilize banking institutions, AIG, the auto industry and families facing foreclosure.

“The Auto Industry Financing Program helped save the auto industry, more than one million jobs, and prevent a second Great Depression,” said Treasury Secretary Jacob J. Lew.

“Thanks to President Obama’s leadership, our economy has rebounded from the depths of the financial crisis and is now creating jobs at the fastest pace since the 1990s. There is more work to do, but as we exit the last major financial investment, it’s important to take stock of the progress we have made, and the critical role TARP and the Auto Industry Financing Program played in getting us to this point.”

TIME Innovation

Five Best Ideas of the Day: December 15

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. To head off surging antimicrobial resistance — which could claim 10 million lives a year by 2050 — we need new drugs and better rules for using the ones we have.

By Fergus Walsh at BBC Health

2. Russia has squandered its soft power.

By Joseph S. Nye in the Journal of Turkish Weekly

3. A resurfaced idea from decades ago could finally unlock nuclear power’s potential to fight climate change.

By Josh Freed in the Brookings Essay

4. To take advantage of the power of diaspora communities to spur development at home, host nations must avoid a ‘one size fits all’ approach.

By by Jacob Townsend and Zdena Middernacht at The World Bank

5. The great recession is over but young and minority Americans are worse off than before.

By Matt Connoly in Mic

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Economy

Wealth Gap Widens Between Whites and Minorities

The gap between white and black household wealth is the highest since 1989

The wealth disparity of U.S. households has widened dramatically along racial and ethnic lines during the recovery from the economic recession, according to a new report.

In 2007, at the start of the recession, white households in the U.S. had a net worth 10 times that of black households. But in 2013, white households were 13 times richer, according to the Pew Research Report out Friday. White households were eight times richer than Hispanic households in 2007 but 10 times richer in 2013.

FT_14.12.11_wealthGapRatios

Researchers note that while wealth of non-Hispanic white households increased a small amount between 2010 and 2013—2.4%—the wealth of Hispanic and black households actually fell dramatically, 14% for Hispanic households and 34% for black households.

Other racial and ethnic minorities were not broken out for analysis in the data compiled by Pew.

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