Sallie Mae has just released How America Saves for College 2010, a study conducted by Gallup. Polling shows that parents of children under 18 consider saving for their kids’ education important and that, despite the troubled economy, they’re doing a decent job of meeting their savings goals. Unfortunately, those goals are far short of what the average college education will cost. Wealthier parents put more into savings, but even those making under $35,000 are making a concerted effort to save.
Somewhat surprisingly, tax-sheltered 529 college plans, available in all states, are only the fourth-most popular investment option for educational sayings, behind retirement plans, investments, and general savings. In fact, many parents don’t know what 529 plans are or how they work.
Among the findings:
Retirement savings accounts are not only used intentionally to set aside money for college, they house the greatest proportion of college savings … Twenty-three percent of the money being saved for college today sits in parents’ retirement accounts. … Twenty-one percent of total college savings is held in investments, but the proportion increases as income increases. The next most-used savings vehicles are general savings accounts, where 14 percent of college funds are saved, and 529 college savings plans which hold 12 percent of funds.
…Although 72 percent of parents say they intend to pay half or more of the total costs of college, this is lower than the 79 percent last year who said they intended to pay that high of a portion. Parents with younger children intend to pay more of the costs than parents of older children. Although parents with higher incomes intend to pay a higher share of costs than parents with lower incomes, the percentage of parents earning less than $35,000 per year who said they intend to pay nothing dropped to 11 percent from last year’s 19 percent. More White parents than African-American or Hispanic parents intend to pay most or all of the costs; conversely, a higher percentage of Hispanic parents intend to pay less than half the costs.
Almost half of parents not currently using a 529 college savings plan said that they are not at all familiar with 529 plans. The most commonly cited reason given by parents who are saving for college but not using a 529 plan was that they do not have enough information about 529s (22%) and a similar percentage said another savings plan is already meeting their savings needs.
Comparatively, the average yearly cost contributed by families to pay for college from parent savings and income is $8,752 in this year’s How America Pays for College study, though this only accounts for 37 percent of the total average cost of college, $24,097 per year.