Saving for College Remains an Elusive Goal

For the last couple of years, Fidelity Investments has surveyed parents of children under the age of 18 about their plans for future college expenses. The most recent survey of about 3,000 parents, reported in this news release from Fidelity, looks at anticipated college costs and family resources available to pay for college. This year’s survey found that 62 percent are counting on student loans to help cover the cost of their children’s college education.

Fidelity found that one-third of parents have either had to reduce or eliminate the amounts that they had been saving regularly for future college expenses, and a similar proportion of respondents expressed fear that their own retirements would need to be delayed in order to pay for their childrens’ educations.

Almost a quarter of home-owning parents were counting on home equity to help pay for college until the recent decline in home prices.  For most, it will be many years before the equity lost will be restored.

Parts of the news release read a bit like an ad for Fidelity, which of course manages 529 college savings plans as part of its business.  Still, the survey does point up considerable weaknesses in the ability of many households to pay for college educations for their children, and many households will need to re-think their plans for college savings.

The situation is especially difficult for parents of children who are just about to enter college, as the credit crunch has not spared the realm of education loans.  Private loan programs have largely dried up, leaving government-sponsored loans as the principal source of college borrowing.

In the long term, I hope we will see changes in the college education landscape.  A few major universities have stepped up their efforts to provide funding for students whose families can’t afford college, but there will need to be more changes in order to avoid saddling college students (and their parents) with significant amounts of debt.  I suspect (and hope) that there will be a shift in American cultural attitudes toward excessive debt as a result of the financial crises we’ve been experiencing, but only time will tell.

I have some thoughts I hope to share in the future on the economic aspects of going to college.  When I have time to organize them, I’ll post further on this, but I’m afraid that won’t happen this week.  This week the Financial Planning Association is having its national meeting in Boston, and I hope to attend as many talks as I can.

About the author

Thomas Fisher, CFP®

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