As the importance of a college degree increases along with the price of tuition, many parents are left wondering how they are going to be able to afford monthly expenses while saving to send their child to the college of their dreams. With the release of Sallie Mae’s annual National Study of Parents with Children under the Age of 18: How America Saves for College 2013, its become apparent that more American families are choosing not to save for their children to go to college then ever before. Though most parents are optimistic about their ability to save, as economic pressures increase college funds are being pushed aside. According to the most recent research about 60 percent of Americans don’t have any form of plan as to how they are going to pay for their child’s college tuition. Of the 40 percent who do have some form of a plan, about 50 percent are saving as much as their expenses will allow, which is still significantly less then they need.
Since 2010 there has been an overall 10% decrease in the amount of parents saving for college over time (Figure 1). Sallie Mae has attributed this decrease to a weaker economy as well as a shift in fiscal priorities within American families. More urgent priorities such as emergency and retirement funds have become the focus of general family savings. This became more evident in the research when there were more families setting up college savings through general savings accounts, CD’s, checking accounts, investment accounts and retirement accounts over designated college savings accounts such as 529 plans or college savings reward programs.
This shift comes side by side with the belief that parents are only going to have to pay for a portion of their child’s tuition. The average expectation a parent will have to spend on their child’s tuition as of 2013 is roughly 32% with the other 68% comprising of student and parent borrowing, student income, relatives and friends as well as grants and scholarships (Figure 3). Its common that many families overestimate how much money their child will receive in federal grants as well as scholarships. This leads many American families to be behind in their college fund savings without even realizing it.
[Source: Sallie Mae]
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