Parents are saving for college, but costs exceed budgets in many cases, a recent survey said. (iStock)
Parents are increasingly saving money for college, but a recent survey said that less than half feel ready to pay for the first tuition bill by the time their child leaves high school, a recent survey said.
Three out of four parents who saved for college had, on average, $45,000 saved, according to the College Ave survey. Of the 75% already building savings, 28% plan to cover their child’s total education costs, but a little less than half (49%) of all parents had a plan to cover the total cost of college before their child enrolled in college.
In its most recent analysis, the College Board estimated the average advertised costs for attending private nonprofit colleges last year were $60,420, compared to about $28,840 for students at public in-state institutions and $46,730 at public out-of-state institutions.
The cost of attending college is surprisingly higher than what parents saving for college expect to pay, the survey said. Roughly 71% of respondents said that the costs are beyond what they budgeted for, with two out of three parents saying room and board and college tuition and fees are more costly than anticipated. Four out of 10 parents listed the child’s expenses while at school as a surprise cost.
“Year over year, our College Ave survey shows that parents strongly believe a college degree is integral to their child’s future,” College Ave Chief Marketing Officer Angela Colatriano said. “The survey highlights how families complete the investment puzzle, from savings and income to scholarships and borrowing. Parents are committed to helping their child achieve life’s next big goal – a college education.”
If you are currently in school or starting soon, and you need more financial aid than what you can receive through the Free Application for Federal Student Aid (FAFSA), consider taking out a private student loan. Visit Credible to find your personalized rate without affecting your credit score.
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FAFSA delay dents plans for how to pay for college
While 75% of parents said they set aside savings to pay for college, the majority of parents (93%) planned to use a mix of methods to help their children shoulder the costs of higher education, the survey said. Sixty-two percent plan to use grants and scholarships, and 42% plan to rely on federal student loans.
Federal student loans, grants and need-based scholarships rely on information provided by the Free Application for Federal Student Aid (FAFSA) form. Still, an overhaul to this form has impacted the amount of student aid some students received for the upcoming fall term. Moreover, 47% of first-generation students couldn’t complete FAFSA, which means these students, who arguably need help the most, will receive no aid at all, a Study.com report found.
The delays have also meant that colleges are months behind schedule awarding financial aid packages to students who have had to delay decisions. Students and schools were already working against the clock after the FAFSA rollout happened in late December. Typically, the forms are available on Oct. 1 to give families and schools the necessary time to fill out applications and determine financial aid eligibility so that students can choose colleges knowing the final cost.
Colleges were scheduled to receive FAFSA applicant information by the end of January, four months later than they typically receive the applications. The inflation fix further delayed the timeline into the first half of March, which means high school seniors are unlikely to receive financial aid offers until at least April and possibly as late as May or June, according to higher education expert Mark Kantrowitz.
If you have filed for your FAFSA aid but need additional funding for school, consider taking out a private student loan. Visit Credible to compare multiple student loans at once and find the one with the best interest rate for you.
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529 plans important savings tool
Forty-four percent of parents said they planned to use a 529 education savings plan to pay for some of the college costs, according to the College Ave survey.
A 529 education savings plan is an investment account that offers tax benefits when used toward qualified education expenses for the account beneficiary. Earnings grow tax-free, and distributions are federally tax-free when used for qualified education expenses. The biggest obstacle preventing more Americans from using 529 plans is the misconception that they require more savings or income to open, according to a recent Edward Jones survey.
With changes to federal and state laws, 529 plans can now be used for more things, yet only 25% of respondents know that these plans can fund more than just higher education. The funds can also pay for room and board, a considerable expense sometimes not covered by scholarships. Savers can also use these funds to repay student loans. Additionally, unused funds can be rolled over into a Roth IRA for the beneficiary beginning in 2024, according to Edward Jones.
If you hold private student loans, you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered.
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