Saving for Child's College, Before Own Loans Paid Off

Fidelity Investments' College Savings Indicator found 60% of parents who have started saving for their preschool-aged childrens' college costs are still paying back their own student loans.

Fidelity found more families are starting to save for college while their children are still in preschool, despite financial pressures. They are also seeking guidance earlier than before and are opening dedicated college-savings accounts, such as 529 college savings plans.

The results came from Fidelity’s fifth annual College Savings Indicator, a calculation of the percentage of projected college costs the typical American family is on track to cover, based on its current and expected savings. After four consecutive years of decline, the Indicator held steady to the prior year at 16%, down from 24% in 2007, when Fidelity first launched the study. While overall preparedness has declined, a larger percentage of parents –more than two-thirds (67%) – have begun saving for college costs, compared with 58% five years ago. 

Forty percent of parents with preschool-aged children (ages 0-5) have started saving for college costs in a dedicated account – up from 27% in 2007, with most parents (53%) saying they were prompted to do so by the birth of a child. Parents may be saving earlier because fewer parents (48%, down from 70% in 2008) believe they will receive a student loan for the full amount needed to pay for college. 

“Preschool parents” are saving for college even though 60% of them are still paying back their own student loans and nearly half (48%) are paying, on average, $576 per month for preschool or day care.Many of these parents will experience a cash inflow when they no longer have to pay preschool or day care expenses, assuming a child attends public elementary school. Sixty percent of these parents are planning to allocate some of that money toward saving for college.

Among parents who have started saving for college, 37% are using a dedicated college savings account like a 529 plan, up from 26% in 2007. One-third of parents (33%) are turning to financial professionals to help guide their college savings decisions, an increase from 21% five years ago. 

“One statistic that hasn’t fluctuated in five years of tracking attitudes toward college savings is that 80 percent of parents believe that a college education is a minimum requirement for a decent job,” said Matt Golden, vice president, Fidelity Financial Advisor Solutions College Planning, in a press release. 

Complete results of the fifth annual College Savings Indicator Study are available at