Is student debt motivating young parents to save for college?

http://www.savingforcollege.com/articles/is-student-debt-motivating-young-parents-to-save-for-college-818

Student loan balances are having a major impact on the lives of young adults. In fact, a new survey from Bankrate.com revealed that 56% of 18-29 year olds say they have postponed important adult milestones because of student loan debt. This includes things like marriage, parenthood and home ownership. Yet for some parents, student loan debt is actually having a somewhat positive effect.

According to the College Savings Foundation’s 9th annual State of College Savings survey, one third of all parents still carry student loan debt. What’s more, 82% of these parents said their own debt was a main reason to consider other ways of paying for college for their children, including savings. In fact, when asked how they plan to pay for their children’s college bills, 51% said they would use savings, up from 45% in 2014.

Looking at the positive

Debt appears to be the biggest motivator for parents between 31- 35 years old. 40% of these parents are paying off student loans, and 91% of said having debt was a reason to consider other ways for their children to pay for college. This is considerably higher than other generations – 76% of parents ages 36-45 and 74% of parents ages 46-55 said that debt caused them to use other strategies to cover college costs. What’s worth noting is that despite the burden of student loans, these parents still believe in the value of a degree and want their children to go to college. Sure, student debt can be frustrating, but these parents realize that those with a degree typically have higher income and better job stability.

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How parents are saving

When it comes to how they save, 41% of parents say they currently own, or are planning to start using a 529 plan, and 42% of parents already have an automatic savings plan set up for college savings, up from 38% last year. The majority of parents are saving between $51-300 a month.

Yet, just as in 2014, 40% of parents still plan to take out education loans to cover some college costs, and 69% anticipate making loan repayments for at least five years. We wonder if these have really considered how much loans will actually cost. Savingforcollege.com’s 529 Savings vs. Loans Calculator can give you a breakdown of how much your monthly contributions to a 529 college saving plan would be if you saved for college versus what your monthly loan repayments would cost if you decided to borrow.

Parents also want their children to pitch in. In fact, in 2015 more parents expect their children to pay up to one-third of total college costs than last year (49% versus 45%). The majority of parents want them to earn the money by getting a job, but they also want kids to get grants/scholarships, take out loans and use their own savings. In 2015, 14% are encouraging their children to use their own college savings, up from 12% last year. A smaller percentage of parents are also planning on relying on grants and scholarships (80% versus 82%) and asking for gifts from friends and family (51% down from 54%).

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