Here's a Shocker: What Parents Can Afford to Pay for College
Here is alarming news: the average American family will only be able to pay for 16% of their children's college costs, according to a new study by Fidelity Investments.
Fidelity generated this grim number after calculating what parents are currently saving for college, as well as what they hope to stash away in the future. The college expenses that parents can cover has declined since Fidelity first rolled out its annual college savings indicator in 2007.
Here is a chart that shows the erosion of the percentage of college costs that parents will be able to handle:
It's not surprising that families are losing ground because college costs continue to outpace inflation. Fidelity estimated that college expenses have jumped 26% in the past five years.
The good news is that a growing number of moms and dads are saving for college. More than two-thirds of parents (67%) are setting aside money versus 58% five years ago.
What I found fascinating was how families are planning to tackle college costs differently in reaction to the runaway costs. As you can see from the chart below, more parents are going to expect their children to live at home during college and attend a state college or university than they did a few years ago.
What Parents Can Do....
While college costs are intimidating, there are ways to shrink the costs. For starters, parents need to understand that college price tags are usually meaningless. Some expensive schools, for instance, are going to cost less for lucky students than state schools that provide meager financial aid. About 88% of students attending private colleges and universities have received price breaks from their schools. Lots of students attending state schools have also captured price cuts.
The best way for parents to get some sense of what they might have to pay for college is to use an Expected Family Contribution calculator. Parents should also take advantage of the new college cost calculators: Take the Guess Work Out of College Costs.
Here are more ways to shrink college costs:
4 Little-Known Ways to Cut the Cost of College
4 Ways to Win a Scholarship
Lynn O'Shaughnessy is author of The College Solution, an Amazon bestseller, and the Shrinking the Cost of College workbook. She also writes her own college blog at The College Solution.
More on CBS MoneyWatch:
25 Colleges with the Highest Hidden Price TagsThe Nation's 25 Most Expensive Colleges and Universities
10 Most Expensive State Universities for Outsiders
25 Cheapest Universities: Are They a Bargain?