Survey: Families struggling to cover college costs
(MoneyWatch) American families are woefully unprepared to cover college costs for their children. That's the take-home message from Fidelity Investment's Sixth Annual College Savings Indicator survey.
Surveyed parents said they plan to cover 57 percent of the total cost of their children's college education. Even with this less ambitious target, Fidelity estimates that Americans are on track to meet just 30 percent of this typical college savings goal.
To cover the shortfall, parents expect to rely on other sources such as grants, scholarships, loans and grandparent gifts to make up the difference.
To help shrink college costs, 49 percent of parents say they will consider having their children live at home and commute to college. Forty three percent will encourage their child to attend a public college.
Twenty seven percent of parents plan to encourage their children to graduate in fewer semesters. That, however, is unlikely because the vast majority of college students do not graduate in the traditional four years. The four-year grad rate among students attending public universities is just 31 percent and it's 52 percent for private institutions.
Parents clearly have other misconceptions as they contemplate their college costs. Forty two percent of parents whose children will be attending college this fall have encouraged them to select a major that will generate higher salaries. Parents who have urged their children to focus on more lucrative majors told surveyors that they expected their children to earn $70,300 when they graduate.
There is little chance of that happening for most college grads: According to the U.S. Department of Education, the median salary is $40,100 for a full-time female worker, who has a bachelor's degree and is between the ages of 25 and 34. For men in that demographic, the median salary is $51,000.
Parents are also underestimating the amount of money that their children will need to borrow. They believe their children will graduate with $14,600 in debt, but the average amount, according to the Institute for College Access & Success, is roughly $25,000.
College costs are scary, but there are ways to make the expense more manageable:
1. Don't assume you will have to pay full price for college. Two thirds of college students in this country receive grants and/or scholarship. In fact, the most expensive schools will sometimes be cheaper than a public university with a low sticker price.
2. Save automatically through a 529 college savings plan or other investment vehicle. Relying on automatic monthly contributions is the best strategy for any big-ticket item, whether it's saving for retirement, a house or college.
3. Encourage your child to be the best student possible. Colleges usually reserve their largest scholarships and grants to the students they covet.
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