Call it the generous generation.
More than half, 53 percent, of grandparents are saving or plan to start saving to help pay for their grandchildren’s college costs, often by opening a 529 account, according to research from Fidelity Investments.
Among grandparents already saving or planning to save, many expect to make significant contributions; when asked how much they envision contributing to college education for all of their grandchildren, they cite a median of $25,000, with 35 percent anticipating they will contribute $50,000 or more.
The study comes a time when college costs and student debt are at record levels. Average student loan debt, in 2010 dollars, rose from $21,736 in the 2001-2002 school year to $27,910 in 2011-2012, according to the Edvisors Network.
Fidelity’s 2014 Grandparents and College Savings Study also found that a majority of grandparents participate in planning for their grandchildren’s college education. Seventy-two percent think it is important to help grandchildren pay for college, and 59 percent give advice to their adult children about saving for their grandchildren’s college educations at least once a year.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity.
“Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions,” he said.
The study also found that more than half, 52 percent, of grandparents are familiar with 529 college savings plans, that they like the fact that 529s are dedicated solely to college savings, and that earnings can be withdrawn tax-free for qualified education expenses.
Fidelity’s data shows a 12 percent increase in the number of new retail 529 accounts opened by grandparents during the first four months of 2014 compared to the same period last year. Overall, approximately 15 percent of Fidelity-managed retail 529 accounts are owned by grandparents.
The online survey of 1,001 adults, 45 years and older with at least one grandchild 18 years of age or younger, was conducted April 9-18 by ORC International on behalf of Fidelity Investments.