Families continue to struggle to meet their college savings goals. The sixth annual College Savings indicator study by Fidelity Investments found that only 31 percent of parents with college-bound children are considering the total cost of college, graduating with debt, the impact of school selection and how the major their children choose could affect job prospects and earning potential.
Of the families who say they are keeping all of these things in mind, 61 percent are actively making changes to their investment plans to better manage potential post-graduation debt. Among those adjustments, 38 percent of families are sending their kids to cheaper colleges; 28 percent are planning to rely more heavily on financial aid and 16 percent are asking their children to change majors to secure better salaries after graduation.
Most parents don't plan on paying more than 57 percent of their children's college expenses, but the average family is currently on track to cover just 30 percent of those costs. To make up the difference, families need to look for additional funding options such as loans, grants and scholarships.
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Seventy-eight percent of parents said they didn't want their children to leave college with a ton of financial aid debt, but in many cases, it is unavoidable. Recent reports show that graduates leave college with an average of $25,250 in student loan debt.
"With college costs increasing an average of 5 percent every year, saving enough for a child's education will continue to be a challenge for many families," said Keith Bernhardt, vice president of college planning at Fidelity Investments. "More than ever, it's critically important for families to review their college goals and savings strategies early and make adjustments to avoid burdens brought on by large amounts of post-graduation debt."
The number of people saving for college has held steady over the past three years, at 66 percent. Familiarity with 529 college savings plans continues to rise and more than one-third of families using these accounts have increased their regular, monthly contributions since first opening their accounts.
Thirty-three percent of parents work with a financial advisor to help guide their college savings strategies and these parents are increasingly asking for advice related to school selection, financial aid, the grant process and how college costs should be divided between parents and children.
"Financial advisors can play an important role in helping parents and children have critical conversations about college decision making and post-graduate plans — including aligning college selection, savings strategies and plans to pay down any post-graduate debt," said Matt Golden, vice president, college savings for Fidelity Financial Advisors Solutions. "Engaging college-bound children in these conversations – along with their parents—also serves as a first opportunity to build relationships with the next generation of clients."
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