WASHINGTON, Aug. 6, 2014 /PRNewswire/ -- Concerned about of the burden of student debt, more parents are prioritizing savings this year over last year as the number one way to pay for their children's college education, says the College Savings Foundation's eighth annual State of College Savings survey of parents across the country. They are saving more than they did last year; and the two youngest categories, parents ages 21-30 and 31-35, are getting a jump on the high cost of college by saving earlier in their children's lives.
Seventy-one percent of parents said that increased public awareness of student loan debt had caused them to look at different strategies for funding their child's education. Overall, saving is a top strategy for 45 percent of parents, up from 43 percent last year and topping loans/borrowing at 15 percent, grants/scholarships/direct aid at 30 percent, and current income at 7 percent.
The survey's findings paint a picture of a changing landscape with an emerging generation of savers and a broader perspective among all parents of where – and whether – their children will go for higher education. Parents are reimagining what higher education looks like: 42 percent think about vocational and career schools in the same way that they think about public or private colleges. That is double the 21 percent of high school students who think that way, as discovered by CSF's recent How Youth Plan to Fund College survey of high school students in May.
The CSF survey of parents found that as many as 18 percent of their children had considered not going to college, with over a third of those feeling that their career choice could be achieved without it, and others balking at their parents spending that much money or their taking on student debt. Nonetheless, 82 percent of parents said that it was very important that their child be able to attend college if they wanted to do so.
Towards that goal, over half, 51 percent, of all parents are already saving, the second highest level in eight years behind 2013's 55 percent. Nearly half, 46 percent, have saved more than $5,000 per child, second only to last year's 53 percent. Over half, 55 percent, of parents had started saving early – between the time their child was born through five years of age. And 24 percent are saving more for college than one year ago, up from 15 percent last year.
According to the survey, parents are confident they will reach their college savings goals, 41 percent, up from 35 percent last year.
Moreover, these savings habits are being exhibited by younger parents. This year's survey included significantly more Millennials aged 21-30 (21 percent up from 7 percent in 2013) and 31-35 year olds (26 percent up from 16 percent last year); and 44 percent of all savers came from these two groups. They also made up over half – 52 percent – of those parents for whom saving was the top strategy for funding college.
"Parents of all ages see the power of saving as the best defense against the cost and potential debt load of college. It is exciting to see families embrace a host of strategies in achieving higher education without a burdensome price tag," said Mary Morris, Chair of the College Savings Foundation.
Families selected numerous ways to reduce the cost of college: over a quarter (26 percent) will pair up two years in community school with two years of college; 22 percent said the child would live locally to save on room and board; 22 percent would take as many AP and IB classes as possible in high school, and 21 percent would choose a state school over a private school.
More are also relying on financial aid: 71 percent up from 65 percent in 2013, with loans included in those packages.
Fifty-eight percent of parents plan to borrow. They are relying primarily on education loans, but also on second mortgages, credit cards or credit lines, or borrowing against their retirement or other investments. Sixty-nine percent expect they or their children to be paying back loans at least five years after graduation, up from 66 percent last year.
Other strategies for funding college:
- 33% of all parents own a 529 plan, and 25% said that 529s were their primary savings vehicle, higher than any other savings category.
- 74% of parents expect their children to contribute to college; and nearly half of those expect them to get a job.
- 55% would ask friends or family for a college savings gift rather than a materials gift.
The CSF survey of 800 parents across the country, income and age categories, was conducted by Survey Monkey. www.collegesavingsfoundation.org
- Personal Finance - Career & Education
- Investing Education