When it comes to planning for college, Generation Z (born in 1997 or a later year) may be learning from their parents’ mistakes. Practically born into a student debt crisis, today’s high school students are well-aware of the high costs of college and the potential risks of borrowing too much to pay for it.

And according to recent data, this experience is having a positive impact on how they approach college. The College Saving Foundation’s 9th annual How Youth Plan to Fund College survey revealed high school students are actively saving for college and are making smarter decisions when it comes to school selection and areas of study. 

Having skin in the game

According to Sallie Mae’s How America Pays for College report, 11% of college costs are paid for with student income and savings. Some parents believe if their children help contribute they will take college more seriously and will be more likely to graduate. But others simply won’t be able to foot the entire bill, which means every dollar their child saves for his or her own education will reduce the amount they will have to borrow.

The College Savings Foundation’s survey revealed that 86% of teens expect to pay for at least some of their college education, and 57% are actively saving. Of those students, 65% have already saved at least $1,000.

Over half (51%) of high school students are currently working to save money for college, and 85% plan to work while they are in college. These students may want to consider depositing their earnings into a 529 savings plan. Investment earnings in a 529 plan grow tax-free and are not taxed when the funds are withdrawn to for qualified higher education expenses. Each 529 plan offers a selection of investment options based on the beneficiary’s age and risk tolerance. For most high school students, that means choosing a conservative portfolio with a heavy allocation to fixed income. (But keep in mind, you can still keep making 529 deposits during college, which means a high school freshman could have a seven-year investment horizon). Not only will a 529 plan allow you to earmark the funds for college, but depending where they live, the parents might qualify for a state tax deduction or credit for contributions.

For most students, savings from a part-time job can help reduce future debt, but it won’t be enough to keep them out of debt completely – so many are getting creative about how to grow their savings. According to the survey, 67% would prefer money for college in lieu of gifts for holidays or other occasions. If the student has a 529 plan that offers a gifting platform, such as plans managed by Fidelity and T. Rowe Price, family and friends can give a gift online using an electronic check.

Students are also postponing college in order to save more money. Instead of traveling the world or volunteering, 58% of teens taking a gap year are doing so to work. A full-time minimum wage job pays just over $15,000 a year, which means a student may be able to save for an entire year of tuition – depending on where he or she decides to go to college.

Shopping smart for college

When it’s time to select a college, today’s high school students are sticking to a budget. In fact, according to the survey, 65% said their decision to go to college at all was based on costs. Many students are also forgoing a traditional 4-year college path in order to cut costs. Over half said costs were a factor in the decision to attend college full- or part-time. And while 53% of students plan to go to a 4-year school, 28% decided on community college and 8% chose a vocational/ career program.

Average room and board prices topped $10,000 for the 2017-18 school year, according to the College Board. Of those looking to cut costs, 62% of students will be skipping the dorm life and living at home during college.

Planning for future careers

For Generation Z, a college education is more than just a degree. These teens are thinking about the future, and 70% would prefer to go to a college that offers actual job skills-training rather than just majors. Over half (52%) of students include vocational/career schools and apprenticeship programs when thinking about college. 

When talking about college with their parents, 43% said their career path was the number one topic they discussed. And the majority of students (63%) said future career plans influenced their college choice.

Check out a summary of the survey’s findings in the infographic below.

Source: College Savings Foundation