Three-quarters of parents (74%) did not seek any financial guidance or education about the savings options available to help meet future higher education expenses. However, Fidelity’s College Savings Indicator found that those families working with financial advisers are on track to cover 31% of future college costs.
According to Fidelity Investments’ second annual College Savings Indicator (CSI), parents are projected to meet only 21% of the total cost of their children’s college education, a three percentage point decrease from last year’s results. The CSI calculates how prepared parents are to pay for future college expenses (currently estimated at $120,000) for today’s high school seniors.
According to parents surveyed, 60% cited day-to-day expenses as a barrier to college savings – and, as a result, over one-third (34%) of these parents have either decreased the amount they are saving or have stopped saving completely for their children’s future college education. In addition, a full 35% of all parents fear they will need to delay retirement to meet college expenses.
In addition to savings obstacles, parents are also facing decreasing funding options; a quarter (24%) of parents who are homeowners report that the recent decline in housing values will directly impact their ability to tap their home equity to fund college expenses – and 14% of those parents anticipate taking a personal loan to help cover the shortfall. Significantly more parents this year (62% in 2008 vs. 53% in 2007) are planning to rely on student loans to help fund expenses. However, nearly one-third (32%) do not believe they will receive a loan in the amount they need.
On the other hand, 60% of parents have already started saving for future college expenses, and the Fidelity survey found that fully half of parents have begun saving earlier, starting to put aside money towards college savings when their child was three years old versus four years old as seen in last year’s findings. Roughly a third (30%) of parents are investing in a dedicated college savings account, like a 529 plan, and more than half (58%) of these parents are investing more strategically, opting for regularly scheduled contributions, instead of lump sum deposits coming from earned money or a gift.
Asked specifically how they expect to bridge the gap between costs and savings:
- 55% of parents will have their child work part-time while in school,
- 44% plan to have their child live at home and commute to college,
- 37% will encourage their child to attend a public school, and
- 23% may ask their child to graduate in fewer semesters.