“Sixty-Eight Percent of Americans are Unhappy With the Way They Financed College,”notes a recent article in the Journal of Accountancy.
Most would have financed college in a different manner than they originally chose, a survey reveals. “Sixty-eight percent of adults with college loans or whose children have loans said they regret how they financed their own or their children’s education.”
And, in excess of 4 of 5 survey participants “questioned at least one decision they made about their education.”
Some wished they’d attended a less costly institution, while others wished they’d decided to attend college in the first place--to enjoy a higher paying job than the one they landed without a degree.
Still others thought delaying college studies would have been advantageous in order to grow savings before starting school.
Clearly, many decisions come into play for consumers as they consider further education and the implications of the large expense.
Research this week reveals such considerations can be quite intimidating for many families; and hard-fought savings still often fall short.
What exactly will a college education cost?
According to Trends in College Pricing 2014 by the College Board, average school year tuition and fees for an in-state student at a four-year, public institution are up 2.9%, or $254--from $8,885 in 2013-2014 to $9,139 in 2014-2015. Room and board tacks on $9,804.
A private, nonprofit four-year college school year tuition bill runs $30,231 in 2014-2015, up $1,100 (3.7%) from the previous school year.
Consequently, “Most Americans Say Higher Education Not Affordable,” according to Gallup. Sixty-one percent believe education past high school is available to anyone, a dip from the 67% who believed this in 2013.
But only 21% say continuing education is affordable.
Tuition bills are up 250% over the past 30 years, “keeping college out of reach for many.” And, 35% of graduates leave college with debt in excess of $25,000.
“Affordability concerns could be placing higher education opportunities at risk for at least some.”
Indeed, “U.S. Parents’ College Funding Worries Are Top Money Concern,” for 73% of parents with kids younger than age 18, says Gallup.
This reality might prompt the question, “Is College Worth It?...”, another Gallup exploration. “The good news is that for most college graduates the answer is: ‘yes.’ But only if they made the most of it,” and 25% do not, according to the article.
Should students decide college is worth it, those enrolling at private, nonprofits will receive around $18,870 in annual grant aid and federal tax benefits, says the College Board. The public, four-year school attendee can expect $6,110 in annual aid.
Families can anticipate their expenses using the “expected family contribution” (EFC) calculator at bigfuture.collegeboard.org. This handy resource explains that EFC formulas take into consideration a family’s assets, size, and number of children who are college students in determining financial assistance.
How much savings can students rely on?
Let’s next examine savings habits and realities for American families.
See How America Saves for College 2015, from a new Sallie Mae study.
About half of parents are saving for college expenses (48%) and 62% of savers are setting aside similar amounts as last year. Twenty-seven percent are saving more. And, about 10% of total savings is dedicated to a college fund.
However, amounts saved overall are less—the lowest in three years. On average, the amount found in college savings is $10,040.
“The highest average total college savings--$11,590—is reported by families using 529 college savings plans.” Those using investments have set aside $9,270 for college; certificate of deposit savers, $6,819; and general savings account users, $3,419.
“Americans Have a Record $248 Billion in 529 College Savings Accounts,” says CNN Money. This is up about 9% over the previous year.
Families are saving early on for college: “About 31% of the savings plans are opened by parents when their child is barely a year old, or before…”
Savings are inadequate, however. The average 529 plan holds $20,474. Despite this all-time high, it will just barely cover the cost of one year at a public college, which is about $19,000.
There were 12 million 529 plans last year, up 4%, due to greater awareness of the plans.
With a variety of savings choices, what exactly are “The Best Ways to Save for College”? MarketWatch suggests Coverdell Education Savings Accounts offer greater flexibility than 529 plans with the option to pay for educational costs from kindergarten through grad school.
It also recommends Roth IRAs because consumers older than age 59 1/2 “can withdraw earnings free of federal income tax for any purpose.” Even parents not of age will still avoid 10% penalty for withdrawals used for higher education.
ThinkAdvisor.com has “5 Tips for Saving for College in 2015.” “It’s imperative for families to have a college funding plan,” notes the article. Here’s how:
Who’s chipping in?
Saving for college is truly becoming a family affair as grandparents get involved, according to a Fidelity survey. Fifty-three percent of grandparents are already saving or plan to, “and a full 90% report they would be likely, if asked, to make a contribution to their grandchildren’s college savings…in place of other gifts.”
Grandparents say they will contribute to all their grandchildren a median amount of $25,000; 35% think they will fund $50,000 or more.
Grandparents believe an education is important and realize parents and grandkids are challenged with college costs. Without their help, “grandchildren could face a significant financial burden” after they graduate.
Indeed, 37% of grandparents report concern about their grandchildren’s ability to go to college without incurring substantial debt.
Interestingly, “Only 8% of Grandparents Likely to Talk With Grandchildren About Money and Saving for College…” says TIAA-CREF, but “85% of young adults say they are open to talking with their grandparents about money and savings.” So grandparents have an opportunity to make financial impact with such a discussion.
Twenty-three percent of grandparents help foot the college bill, but want to know the kids are serious. “…Their willingness to help depends on the habits and maturity of their grandchildren.”
There are many reasons parents don’t save for college:
Help members consider all facets of paying for continuing education; costs they might expect, resources at their disposal, and savings plans they might investigate.
Research suggests it is never too soon to start.