SEPTEMBER 28, 2017 • JERILYN KLEIN BIER
More parents are saving regularly for their children’s college education, and half of them are using the expertise of a financial advisor according to a new survey from the College Savings Foundation (CSF), a Washington, D.C.-based nonprofit.
Among all parents responding to the foundation’s 11th Annual State of College Savings survey, 83 percent are saving for their children’s college education—an all-time high in the history of the survey. Furthermore, 75 percent of respondents are saving systematically, 38 percent have saved more this year than last year, and 57 percent started saving by the time their child turned 5 years old.
“Overall, we’re encouraged that more people are saving than ever, they’re saving more than ever and they’re doing it systematically,” says Richard Polimeni, chair of the College Savings Foundation.
A big savings motivator, he says, is that many respondents are still grappling with their own student loan debt and don’t want their children to be similarly saddled. Nearly half of the parents who are saving for their children’s education (46 percent) are still paying off their own student loans. It’s made 90 percent of them consider other ways to finance their children’s education—namely through savings.
Among parents with their own college debt, 53 percent owe more than $20,000 and 31 percent owe between $20,001 and $30,000. U.S. student loan debt ballooned to $1.4 trillion in 2017, according to Experian, a global information services company.
The CSF survey found 71 percent of the savers have amassed more than $5,000 per child; 19.7 percent had saved $5,001 to $10,000; 17.29 percent had saved $10,001 to $25,000; 16.84 percent had saved $25,001 to $50,000; 11.88 percent had saved $50,001 to $100,000; and 5.41 percent had saved more than $100,000.
Polimeni, also the director of education savings programs at Bank of America Merrill Lynch, is glad half of the respondents are working with financial advisors. “If an advisor is going to take a holistic approach,” he says, “saving for college needs to be part of this.” Saving for college is only second to saving for retirement, he adds.
Interestingly, a greater percentage of younger parents are working with advisors for college financial planning—more than half of respondents in the 21-to-30 and 31-to-35 age groups, versus half in the 36-to-45 bracket. Further, 79 percent of all respondents (and 88 percent of those ages 21 to 30) say they’d work with an advisor if they knew it would help them save for college.
The majority of respondents working with an advisor (59 percent) say their advisor’s primary recommendation for saving for college is a 529 college savings plan. And 51 percent of the respondents are also aware they can invest in a 529 plan to fund their own educational expenses, such as graduate school.
Many parents indicate they’re considering strategies to cut college costs, such as having children start off at a community college (29 percent), live at home (22 percent) or attend a state school (15 percent). They’re thinking about vocational and career schools. And 71 percent expect their kids to contribute to college costs.
For the first time, the survey asked parents about the concept of free college. Even if free college were adopted across the U.S., 80 percent of respondents would still save for higher education. Notably, 60 percent are aware that many college expenses aren’t covered by the current proposals.
Parents are doing their homework.