As student debt increases in America, so does the amount parents save for their kids’ college education.
The typical amount parents are saving for college is $18,135, says a joint poll from lender Sallie Mae and research company Ipsos. That’s up from $16,380 in the last poll two years ago.
“Most parents aspire to give their children the opportunity to attend college, and it is encouraging to see them saving more and employing smart habits, and taking deliberate actions to make college a reality,” says Sallie Mae CEO Raymond J. Quinlan. “Our research shows most parents are proactively preparing financially to give their children the advantages of higher education, and having a plan pays off.”
How are parents saving?
Paying for college is a high priority for parents. College saving is as important as saving for retirement to them. Only day-to-day expenses and emergency savings for emergencies are higher priorities.
This year, only 10 percent of parents are dipping into their retirement funds to pay for their child’s education costs. That’s down from 20 percent in the last poll.
To ensure they stay on track with their savings, 61 percent of parents set aside money for school on a regular basis. Thirty percent of parents have cut back on things they don’t need, and 27 percent have cut back on household expenses.
And another positive takeaway, 86 percent of parents with a college savings goal are confident they’ll make it. The typical goal parents are planning to hit is $55,342. They’re one-third of the way toward meeting that goal, the study says.
“This year’s report findings reflect America’s rising consumer confidence levels overall,” says Ipsos VP Julia Clark. “The data show that parents are making smarter – and more optimistic – decisions about their plans for education for their children.”
Why saving for your kids’ education is important
Student loan debt in the U.S. has reached a new high of $1.5 trillion. Student debt is holding back most of the millennial generation from homeownership, marriage and having children.
With the amount these parents are saving for the children’s education will greatly reduce their need to take out loans. Debt.com has reported before that more than half of undergraduate students felt college was more expensive than they originally planned. That’s despite the fact that 73 percent of students said they considered the cost before applying to school.
Currently, there are 44 million Americans with student loan debt, according to credit scoring company FICO. And the typical monthly payment borrowers make $351. Having debts can affect your credit score. If you need to borrow for school, it’s important to know what will improve your score after college and what will hurt it.
How can borrowers improve their credit?
Over the past year, FICO analyzed the credit behavior of 10 million borrowers. It determined the behaviors of borrowers who increased their score 40 points, and those who decreased it by 40 points.
How to increase score 40 points in a year
- Pay bills on time: 75 percent never missed a payment
- Pay down debt: Paid down 28 percent of credit card balances
- Don’t take out more debt: Decreased new account openings by 18 percent
How to decrease score 40 points in a year
- Don’t pay bills on time: 74 percent missed at least one payment
- Down pay down debt: Increased credit card balances by 78 percent
- Opened more lines of credit: Increased credit inquiries by 9 percent
Student loan debt can affect your future finances after college. As you look into buying cars, houses, even saving for retirement your credit behavior will follow you. It’s better to increase your score than decrease it.
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