It’s that time again—time to revisit how America is thinking about, planning for, and saving toward college, thanks to Sallie Mae’s annual How America Saves for College study, conducted by Ipsos.
This year’s results aren’t shocking—but they’re not entirely cheerful, either. Parents’ average college savings have decreased to $10,040 from last year’s more optimistic $13,408. And only 48% of parents are saving for college at all.
Statistically, that’s not a significant change from last year’s 51% who were saving for college or 50% the year before that, but it’s the first time the percentage has dipped that low. “I think, in absolute numbers, the fact that it’s less than half of parents is noteworthy,” says Martha Holler, a spokesperson for Sallie Mae.
Primarily, people aren’t saving because they don’t have enough money—the main reason cited by 61% of non-college-savers. Even 45% of high-income families report not having enough cash to save for school.
“The decline in savings for college is symptomatic of, really, an overall decline in savings across the board, whether it be for a house or car or retirement,” says Michael Gross, vice president at Ipsos. “The silver lining is that the percentage of savings set aside for college has remained constant at about 10 percent. It’s just that the overall savings pool has declined.”
Cost of living increases take the blame for much of the non-saving going on. Certainly, for people saving less this year than previously, 59% of them say their cost of living is higher now. “As overall costs get more costly, it becomes more and more of a challenge to put that money aside for college,” Gross says.
That seems especially true of the middle class, of whom only 46% are saving for college this year, compared to 51% last year. As a group, it seems that growing expenses—and jobs that aren’t paying as much as they used to—have impacted their ability to sock college money away.
For those who aren’t saving at all, almost two-thirds believe their kids will scrape together enough money via scholarships and financial aid to cover all their costs. (Hey, parents: Please note that last year’s How America Pays for College report showed that undergrad students got about $3,644 from scholarships and $2,883 from grants—and the average public four-year university cost $18,943 for tuition, fees, room and board, according to the College Board.)
For those who are saving, general savings accounts are the preferred method of stockpiling, and only 27% are using 529 savings plans. It could be that people still aren’t so sure how 529s work or what’s required to open an account. And that’s a shame, since families using 529 plans have put away the most money of anyone ($11,590).
“Twenty-three percent are using just a checking account to pay for college,” says Rick Castellano, another Sallie Mae spokesperson. “We want families to understand that tax-advantaged accounts are out there and available. State by state, there are very low requirements to start a 529 account. In some instances it’s as little as $25.”
There is good news. The number of parents who have automated their college savings—having an amount transferred to savings or a 529 plan at regular intervals—has increased to 41% from 33% last year. And 31% are setting aside a goal amount every pay period, compared to 26% last year.
Some 42% of families even have a plan for how to pay for college. Indeed, parents who are saving and who have a plan have accumulated a hefty 46% more for college than non-planners—$11,102 compared to $7,611. And they’re nearly twice as likely to have talked about paying for college with their child, which, as it turns out, lots of parents don’t do.
Of those currently saving toward college, 57% plan to bump up their savings amount over the next five years. That's a good idea, since college costs aren't going anywhere. As for the half of you who aren't saving anything, get going. America has a long way to go.
