Study reveals parents need more help saving for college

http://www.savingforcollege.com/articles/study-reveals-parents-need-more-help-saving-for-college-808

Financial Professional Content

American parents are fed up with rising college costs. According to HSBC’s latest Value of Education survey released last week, 71 percent of American parents believe that a college education is unaffordable for most people, and 42 percent say that universities do not offer a good return on investment. That’s not surprising, since the average cost of just one year of tuition, fees and room and board was over $42,000 last year. If prices continue to rise at the current four percent inflation rate, you’re looking a total cost over $364,000 to attend a private university. And the burden of student loan debt also continues to rise, with the Class of 2015 owing an average of just over $35,000 per student.

But the majority of parents (60%) still want higher education for their children, and many (31%) even want them to pursue a master’s degree or higher. In fact, 42 percent feel that their child will need a postgraduate degree to standout in the workplace. This aligns with the top careers American parents want for their children, which include competitive fields such as engineering (14%), medicine (13%) and computer science (10%).

But parents feel that college is more than just career training. 88 percent of parents say that the most important thing they want their children to learn in college is gaining independence. 87 percent want their children to learn to be financially responsible and 84 percent think excelling academically is most important.

So how can advisors help clients achieve these goals for their children?

In the report, HSBC offers practical tips for parents in planning for their children’s education. Since almost a third of parents want their child to achieve a postgraduate degree, it’s recommended that families consider the financial impact that would have. For example, who should be responsible for the costs? 91 percent of parents of children who are planning to attend college said that they would fund at least some of the costs. But do these costs include graduate school tuition? Would the student continue on to graduate school immediately after obtaining their four-year degree? Or does it make more sense for the student to take time off to work?

Regardless of the path for a child, the parents must make saving a priority. While 55 percent of parents who have pre-primary school children intend on using a specific college savings plan to fund their education, only 31 percent of parents of current college students are doing so. What’s more, other parents haven’t saved at all – claiming that they had nothing leftover after paying bills and other expenses (63%) or they simply haven’t given it any thought (20%). This lack of planning inevitably leads to borrowing. In fact, 59 percent of parents say their children will take on debt to pay for college, and 34 percent expect to take out their own loans. These parents expect it to take almost nine years to pay off their own loans, and that it will take their children closer to ten years to be student-debt free.

Knowing that college costs are a real worry for your clients and prospects creates an opening for you as an advisor to show value. Make college savings and planning a regular part of your conversation with all parents and grandparents. Do your best to ease their concerns about the high costs by offering non-traditional advice such as how to find scholarships. If you have clients who are doubtful about using a college savings plan, be sure to clear up any misconceptions. And when it comes time to choose a plan, you can compare your savings options at Savingforcollege.com to see which vehicle best suits the client.