DALLAS TWP. —Ken Brown’s daughter Kathleen is set to attend Misericordia University in the fall and major in education. Even though the family started a college savings account when Kathleen turned 6, the tough economic times have curtailed what the family had intended to set aside.
Their story is echoed across the nation and is clearly demonstrated in the findings of an annual report and survey commissioned by education financing company Sallie Mae.
The report being released today shows the recent recession has impacted not only the percentage of families that say they’re saving for their children’s education but also how much they’re socking away.
“How America Saves for College 2013” polled more than 1,600 parents in August from across the nation and found that where in 2010, 60 percent of families were saving, this year only half report saving for their children’s college education. Not only are fewer families saving, but the families that are saving are putting away less. The survey showed an average of $11,781 saved in 2013, compared with $21,615 in 2010.
While 54 percent of families who are saving say they put away the same amount for college in the last year as they had in the previous year, 16 percent of families saved less for college in the pastyear.
Their reasons for saving less include:
- A combination of unexpected expenses in the past year: 54 percent
- Higher cost of living: 49 percent
- And lower income compared to the previous year: 47 percent.
Misericordia University President Michael A. MacDowell said the survey shows what many in higher education already know — the economy is hurting families and forcing them to make tough decisions. But, he said, it also shows that parents still understand the value of a college education in today’s world.
Eighty-six percent of parents surveyed said they are willing to stretch themselves financially to obtain the best opportunity for their child’s future. MacDowell said the investment of a college degree will pay off in the long run. The latest figures, he said, show lifelong earnings of $1.3 million more than those who earn just a high-school diploma.
But getting that degree is costly — and climbing.
For those with children who will be attending college in the next five years, the cost is likely to be $99,125 for four years at a public institution and $203,114 at a private institution, according to Sallie Mae’s College Cost Calculator. Those costs will escalate in a decade to $139,028 at a public institution, or $248,878 at a private institution.
The survey shows that among those now saving for college, the average family plans to save $38,953 per child. That means parents know they’ll only be paying for a portion of their child’s education, with most expecting their child to receive scholarships or take out loans.
Among families that have not started saving for college, 45 percent said they are focusing on other savings priorities instead. A 2012 survey of parents commissioned by the Certified Financial Planner Board of Standards and the Consumer Federation of America found similarly, showing that, since the recession, parents are more likely to save for short-term goals over longer-term goals such as saving for their child’s college education.
“Over the past two years the economy has significantly affected families’ ability to save for college but not their drive to do so,” said Joe DePaulo, executive vice president of Sallie Mae. “We want families to know that saving even small amounts can add up over time, and every bit helps.”
MacDowell said even paying for some college out of a savings plan will benefit students’ financial health in the long run.
Even with scholarships and grants in hand, Brown, of Honey Brook, Chester County, said he believes the debt his daughter will graduate with will total in the tens of thousands of dollars. He noted that only about 10 percent of Kathleen’s college education costs will come from the college savings account the family set up 11 years ago. Though he wanted to add to those savings over the past five years, “we have just not been able to.”
Jane Dessoye, director of admissions at Misericordia, noted the average student graduates with $26,600 in student loan debt nationally. At Misericordia it’s closer to $22,000.
She said the data contained in the Sallie Mae report is unfortunately more than just numbers to her. She sees the faces behind the numbers all the time.
She noted that whenever a student receives a loan or some sort of aid, the parents’ salaries are listed. If there’s a drop in that total the next year, the school is sent what’s called a “special condition” notice.
From 2011 to 2012, she said she saw close to a 20 percent increase in those letters.
“There’s a lot of sad stories out there,” Dessoye said.