By Jessica Mintz,
More parents are saving for their kids’ college educations before the youngsters even hit kindergarten. But between the pressures of a stalling economy and the ever-rising cost of higher education, those savings will cover just a fraction of the cost of a four-year degree, according to a new Fidelity Investments study.
This year, 67 percent of parents surveyed have started tucking away money for tuition. That’s more than the 58 percent Fidelity found in 2007, the first year it conducted the study.
More than half of parents with children aged 5 or younger are still paying off their own student loans, and nearly half are paying an average of $576 per month for junior’s preschool or day care. Yet 40 percent are juggling those financial obligations with a dedicated college fund for junior, too, up from 27 percent five years ago.
Even as parents grow savvier about saving, those college funds are projected to cover a shrinking portion of the cost of a degree, according to Fidelity’s calculations. Today, Fidelity expects the typical American family will be able to pay for 16 percent of college costs, based on current and expected savings. That’s down from 24 percent in 2007; over those five years, college costs have jumped 26 percent, Fidelity says.
(As a plug for the value of financial advisors, Fidelity Investments also notes that parents who work with an advisor are on track to cover 31 percent of college costs.)
Parents are far less optimistic than they were a few years ago about the amount of college costs they’ll be able to cover with loans. And more of them – a full 75 percent – say they don’t want their kids to graduate with a mountain of debt anyway.
Instead, a growing number of parents are asking their kids to work part-time to help pay for college. They’re encouraging junior to live at home and commute to school, to pick public schools over private universities and to graduate in fewer semesters.
The percentage of parents who believe they are responsible for footing the bill for college was higher this year than in 2007, and they are increasingly going back to work or getting a second job.