All-time high savings from parents aren't enough to get rid of all the student debt
It’s not just students that are surprised by college costs. Parents aren’t as prepared as they think they are.
Fidelity says parents are more committed than ever to lowering their kid’s college costs but are still missing out on how much it truly costs.
It’s great that 72 percent of families are preparing to save up for college. But parents of preschool-aged kids are underestimating the cost of a four-year college degree by an average of $110,000. High school-aged parents underestimate the cost by an average of $70,000. They might be conscious of saving for college, but parents across the board just aren’t saving enough.
“Many parents are looking to reduce the financial burden their children will face,” Fidelity says. “In fact, many parents intend to bear the brunt of college expenses.” Just a bit more than half — 51 percent — of parents plan to cover their children’s college costs with their own savings or loans.
Even worse, parents of high school-aged kids are still on the hook for their own college expenses. Fidelity says 37 percent of them say they are still paying off their own student loan debt. Parents of preschool-aged kids, too, face the burden, as 68 percent of them are paying off their student loan debts.
While parents may be woefully unprepared for how much college is going to cost their families, they are doing it right by preparing for it early. Almost half of parents have started a 529 college savings plan and regularly contribute.
Even as parents save, though, they are worried their financial preparedness is going to hurt their kids later. Fidelity says 44 percent of parents believe that the amount they have saved for their child’s college education will hurt their chances of getting aid in the future.
Parents should be looking at a bunch of different ways for their kids to get financial aid. Millions of high school graduates left $2.3 billion in federal financial aid behind when they entered college this year. It means they were more likely to shop around for student loans, only growing the $1.3 trillion student loan debt our country is drowning in.
To-be college students need all the help they can get, both financially and knowledgeably. Most high school students expect their parents to pay for any college they want, gleefully ignorant that their parents are paying off their own loans, have other bills and financial responsibilities, and are hoping to save for their own retirement without dying broke first.
Fidelity recommends parents map out a “savings journey,” or a long-term budget and financial plan. Not only for their child’s future, but theirs that includes their child’s future. Those with a financial plan have saved nearly double than those who don’t have a plan in place.
“The key is to get started,” says Fidelity representative Keith Bernhardt. “Set a reasonable goal to start building your college fund, and take advantage of free and simple to use tools available online to refine your savings goals over time.”
Be smart about involving your kid in your plan. Make sure they know how much money you can reasonably contribute and their responsibilities when they are older. Parents aren’t doing enough talking about money to their grown kids, which means that another generation is ignorant to how to live within their means and spend responsibly. But it could also mean that parents just don’t know enough about personal finance to teach their children.
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Article last modified on February 23, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Despite More Planning, Families Find College is Still Surprisingly Expensive - AMP.