As college costs climb, parents are doing a better job of saving for their children’s college needs instead of relying too heavily on debt.
“More parents than ever — especially between their early 20s to mid-40s — are purposely and regularly saving for their children’s education,” said Richard J. Polimeni, chair of the Washington, D.C.-based College Savings Foundation.
The percentage of parents saving money for their children’s college education hit an all-time high — 83 percent — in the 11th Annual State of College Savings survey by the foundation, a nonprofit helping American families save for higher education.’
Of those who are saving, 71 percent had put away more than $5,000 per child and 36 percent said 529 college savings plans were their primary savings vehicles.
A 529 plan is a tax-advantaged savings plan designed to encourage setting aside funds for future college costs. Money in a 529 plan grows tax-deferred and the earnings are never taxed as long as it is used for qualified educational expenses.
The savings plans are operated by a state or educational institution. They are named after Section 529 of the Internal Revenue Code, which created them in 1996.
“We are really encouraged by these stats on saving for college,” said Mr. Polimeni, who works as director of education savings plans at Bank of America Merrill Lynch in Pennington, N.J. “Student debt now stands at $1.4 trillion. That’s $37,000 per student that graduated and borrowed money.”
The survey of 800 parents across the country, evenly divided across income levels also found that parents are looking for ways to reduce college costs.
Top strategies are attending community college for two years and transferring to a four-year college [ 29 percent]; living at home [22 percent], and attending a state school [15 percent].
Tim Grant: firstname.lastname@example.org or 412-263-1591.
First Published September 29, 2017.