Middle-Class Families Shrink Their College Fund Contributions

[Purveyor]

by Suzanne Woolley
7:00 AM EDT
April 29, 2015

Fewer parents are finding the money to save for their kids' college. And those who are saving, are saving less. After a 30 percent jump in the level of average savings for 2013, the day-to-day cost of living, combined with lower earnings and unexpected expenses, helped push the amount parents have saved for their kids' college down 25 percent in 2014, according to a new survey. The average savings level of $10,040 is the lowest in three years.

Parents still value college as much as ever, according to a report released on Wednesday by Sallie Mae. Many still couldn't match 2013's savings. The share of middle-class families that saved for college dropped to 46 percent, from 51 percent, the first time in the survey's five-year history that it fell below 50 percent. Among the income groups broken out, middle-class households also had the highest share saying they'd cut back on household expenses to add to savings in the past year, at 27 percent. (Middle-class families are defined in the survey as having between $35,000 and $100,000 in income.)



On a more positive note, single-parent families are saving a surprising amount, and even saving more than multiparent families. Single parents have put away an average $11,868 for their children's college costs, compared with $10,341 for parents who live together.

When choosing how to save, about half of all families rely on basic savings accounts, which, as anyone with a savings account knows, yield next to nothing. And 32 percent of lower-income families use checking accounts. These are dangerous places for would-be savers to plunk money, because they're easy to tap.

A tax-advantaged 529 college savings account invested largely in equities—depending on how far off college payments are—could be a better way to save. In the 2014 survey, which looked back on a year when the Standard & Poor's 500 Index rose about 27 percent, Sallie Mae says the 30 percent increase in the average amount saved for college was driven by gains for middle- and high-income families in the value of those savings. The S&P 500 gain college savers looked back on in this year's survey was about 11 percent.

more...

http://www.bloomberg.com/news/articles/2015-04-29/middle-class-families-shrink-their-college-fund-contributions

[seabeyond]

1. yup. for debt free, i am giving my boys a number that they cannot go over. and it is not a high

number either.

they will be damn lucky if they get out debt free. and the whole dorm, meal ticket thing? i am not seeing it.

[TheBlackAdder]

2. One kid is going to a top school in the country, they allow 50% Community College credits.

My other college-bound kid is enrolled in a County College to University transfer program.

===

The eldest took a Spring admission, took Community College courses in the summer and fall after high school and takes summer and winter courses. All transfer because she made sure they are preapproved. She is on track to graduate from college in 3 years with a double major. Saving around $90K. She also pays only 2.5 years of room and board, has a combined $38K in scholarships for those 2.5 years. Her out-of-state college is less than going to an in-state university.

My son will do the same, paying $300 a class instead of around $1200 a class for the first two years.

[seabeyond]

3. my first did the same, transferrable AP and will have 3.5 yrs. athletic/academic scholarship saving

20k a year. he gets the dorm and meal ticket. my youngest is not my oldest and will not be walking it the same. lol. i hear ya. and this is when i present reality to my youngest, lol.

good for you. there are options. and we are doing and researching options to find ways for youngest.

the oldest though, will be going on to further education for another three years. we do not have the $ for that and i do not know how he will be able to arrange that. he is looking at gpa getting him scholarship, or else it will just have to be a loan.

[TheBlackAdder]

4. I forgot, she has 12 AP credits which don't count towards the 60 credits of county.

So really, she is going to this school, and of the 120 credits, she comes in with 72 as either AP or at a county college rate.

The funny thing is, we live in a competitive school district with numerous Ivy school students every year. She was a class president and some of her classmates laughed at her plan to do this. Now, after the second year, they are all kicking themselves because they are saddled with debt and my daughter will walk away with under $15K in total obligations.

One kid, doen the street, went to one of those law enforcement programs. But instead of going to an in-state school, he went to the next state over, so his tuition went from $25K a year to almost $60K with R&B. Needless to say, his parents weren't too happy. But he is realizing the financial burden it's causing and compares it to my daughter.

[seabeyond]

5. bummer with the AP. it is something to consider. on lucked out that ALL of his were transferred. nt

[TheBlackAdder]

6. Oh, the AP Credits took. They did not impact her taking transferring 60 county credits

I thought the school would cap her at 60 non-school credits, but the AP credits are being treated separately. So she is able to actually get 72 total credits at reduced rates. The savings was a reduction from $3,000 a credit to $100 a credit for county, and $33 a credit for AP, as they pay $99 an AP test.