A majority of parents using child tax credits to fund higher ed
Washington, DC, September 14 – With the national savings rate rising during COVID, the College Savings Foundation’s (CSF) 15th Annual State of College Savings Survey finds that the majority of U.S. parents have not only saved for their children’s higher education, but are also choosing savings as far and away their preferred way to pay for it – well above scholarships, loans and current income.
Drawing upon the perspectives of more than 1,000 parents of children of all ages across the country and income levels, the survey paints a full portrait of the nation’s savings-oriented households:
The 2021 expanded child tax credit – approved by Congress and the President and sent to families starting in July – are already being channeled toward higher ed savings, with 58% of parents planning to use part or all of their child tax credit to save for their child’s higher education. Of those, 72% are planning to put it in their 529 plan (42%), or open one for that purpose (30%).
“The message is clear that families are prioritizing savings for their children’s higher education, and are taking advantage of the child tax credit to do so through 529s,” said CSF Chair Vivian Tsai.
The survey, which was conducted in the first two weeks of August, showed that 70% of parents are saving more this year (21%) or the same (49%) as one year ago. This is in keeping with the nation’s personal saving rate, that reached as high as 33.8% in April 2020, and has ranged this year from 8.8% in June to 26.9% in March 2021.
The survey also identified that parents are aware of other uses of 529 higher education savings plans:
“We were also pleased to see a growing awareness of the many uses of a 529. This flexibility reflects the changing mindset of families to embrace a broader definition of higher education and a wider path of opportunities for their children and themselves,” Tsai said. 63% of parents said they think of vocational and career schools in the same way as public and private colleges.
Children expected to contribute
While 92% of parents plan to help fund their children’s higher education, 63% said that they expected their child to contribute as well. 54% of those anticipate that their child will pay up to one-third, and 46% over one-third, of the costs. For the most part, parents expect those funds to come from their child’s job (40%); scholarship, grant or fellowship (28%); loans (14%) or child’s own savings (13%).
Loans still a serious consideration for majority of parents
With nearly $1.6 trillion in outstanding student debt, loans continue to be a solution for families. 34% of parents said they or their spouse were currently paying off student loan debt. Nonetheless, 64% said they would take out loans for their child’s higher education, with 59% of those saying education loans would be their number one financing source. Among the remaining 36% who did not want to take out loans, 48% did not want to take on debt in this economy, and 41% said they don’t think debt is a good financial decision ever.
28% were aware that 529 plans can be used to pay up to $10,000 (lifetime limit per beneficiary) toward student loans.
The CSF 2021 State of College Savings survey of parents was conducted with 1,005 parents across the country and income brackets via Survey Monkey. The College Savings Foundation (CSF) is a Washington, D.C.- based not-for-profit organization helping American families achieve their education savings goals.
