A new study suggests that parents are saving more for college, but most of them are still setting aside significantly less than what it will cost for just one year at a state university.
The average family has saved $15,346 for college costs, which represents a 30 percent increase from 2013, according to Sallie Mae's annual college savings survey. Undoubtedly, a great deal of that gain can be traced to the stock market's spectacular returns in 2013.
The average amount that parents with teenagers have saved is $21,416, compared to $16,498 for parents with children between the ages of seven and 12 and $10,282 for younger children.
Who is saving for college
Only half of American families (51%) with children under the age of 18 are saving for college. Before the recession hit, that was around 60 percent. Nearly three-quarters of parents with household incomes of $100,000 or higher are saving for college.
Not surprisingly, the majority of nonsavers (58 percent) say they don't have money to set aside in college accounts. One reason parents offered for not saving was more surprising. One in five said they expect their child to qualify for enough financial aid or scholarships to cover college costs.
That's not a likely outcome. While two-thirds of college students receive scholarships or grants from a variety of sources, 71 percent must borrow to pay the college tab. The average debt of graduating seniors now exceeds $29,000.
Parents are saving the biggest amount of money for retirement, which represents 53 percent of their savings. In contrast, 10 percent is dedicated to college.The average family has a total savings of $115,604.
Only 45 percent of families saving for college have set a goal. The average savings goal for those who have one is $75,563.
The Sallie Mae report illustrates just how wide the gap is between what college costs and what families are prepared to pay.
College prices vs. savings
According to the College Board' 2013-2014 annual price figures, it will cost a student attending a public university in his/her own state nearly $23,000 for one year. Students who chose state universities beyond their borders will pay more than $36,000, while the annual cost of a private school is closer to $45,000.
Colleges and universities are nervously aware that fewer families are able to cover college costs today, but they continue to raise prices. The higher-ed industry has not yet experienced the kind of disruptive change that has rocketed other industries, but someday it will happen.