Income level, living expenses, and repaying their own student loan debt prevents many parents from savings for the higher education expenses of their children, according to a survey from the Certified Financial Planning Board of Standards (CFP Board).
While 83 percent of the 1,003 parents surveyed are currently saving or have plans to start saving for their children’s higher education, 17 percent of parents are not and said they have no plans to do so. Sixty-six percent said they have not started saving for their children’s higher education because they do not have the funds after paying everyday living expenses, and 48 percent said that building an emergency fund and saving for retirement had to take precedence over saving for their children’s education.
Those who have started saving reported that they have not saved more than $10,000 and typically have saved more money for their eldest child than for their younger ones.
Many parents – 31 percent - cited personal student loan debt as a restriction on their ability to save for their children’s higher education. Of the 47 percent of parents who took out student loans for their own education, 42 percent are still in repayment and 15 percent still owe more than $25,000. Parents aged 18 to 39 were more likely to cite student debt as a hindrance to saving (42 percent) than parents 40 or older (24 percent), according to the survey.
Fifty-six percent of parents said they are “counting” on or hoping to qualify for financial aid for their children’s higher education. However, nearly one in four said they either do not know or have not started thinking about the issue. Most parents – 45 percent – said they expect their children to receive merit aid to help pay for their educations, while 13 percent expect athletic scholarships.
Among the parents who have started saving, 61 percent are using a savings account, 40 percent are using a 529 plan, and 33 percent are relying on investments.
Publication Date: 9/19/2014