As college kids across the country head back to campus this fall, parents will be worrying about more than just whether they’ll make good grades. The question of how to finance a college education looms large—and not just for the folks actually sending their children to college this year.
People are beginning to think about how they will pay for their children’s educations at a younger age, according to the College Saving Foundation’s eighth annual State of College Savings survey. Out of the 800 people who answered this year’s survey, 21% were between age 21 and 30. Last year that age group made up only 7% of respondents. Just over a quarter (26%), were 31- to 35-year-olds, compared with 16% last year.
Increasingly, parents are starting savings accounts to pay for college when their kids are still young. Although 58% of those surveyed said they will use credit cards, student loans, second mortgages and other means of borrowing to help pay for college, 33% have a 529 savings plan for their child. Twenty-five percent said that their 529 plan was their primary savings method for their kids’ college.
A 529 savings plan lets families set aside savings in a special account with tax advantages. Section 529 of the Internal Revenue Code created these plans in 1996. Each state offers its own 529 plan, with differing rates and rules.
Ways to save
Survey respondents cited several ways to make college more affordable. One was to take courses at a community college for the first two years and transfer to a four-year college or university later; 26% said they would do this. Twenty-two percent said their child would live at home to save on room and board costs, and another 22% said their child would take as many advanced placement college courses in high school as they could. Twenty-one percent said sending their child to state school, rather than private school, was part of their savings strategy.
Seventy-one percent of people said they would rely on financial aid to help them afford higher education for their children. And 74% expect their child to chip in and foot part of their tuition bill. A little over half, 55%, plan to ask friends or family to set up a college savings account for their child, rather than getting them gifts.
Awareness of college costs
Seventy-one percent of survey respondents attributed their savings mindset to increased public awareness of college costs. Publicity about the growing student loan crisis has made people more apt to examine savings strategies.
Overall, 45% of parents said that savings was their number-one plan for affording their kids’ college. Thirty percent plan on grants, scholarships, and direct financial aid. Fifteen percent said they would mainly rely on loans and borrowing, and 7% said they would just use their regular income.