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Fidelity® Study Finds Less Than One-Third Of Families Consider The Financial Realities Their Children May Face After College Graduation
Planning Ahead Is Critical as Parents Are on Track to Meet Just 30 Percent of Their College Savings GoalBOSTON – Fidelity Investments® today announced the results of its sixth annual College Savings Indicator study, which found that families continue to struggle to meet their college savings goals. Currently, only 31 percent of parents with college-bound children are considering the total cost of college, graduating with debt, the impact of school selection and how the major their children choose could affect job prospects and earning potential.
Of those families addressing these tough issues, 61 percent are actively making changes to their plans to better manage potential post-graduation debt. Among those adjustments, 38 percent of families are opting for less expensive colleges, 28 percent are planning to rely more heavily on financial aid and 16 percent are asking their children to change majors to secure better salaries after graduation.
These conversations are more important than ever, as the study finds that on average parents plan to pay for only 57 percent of their children’s college costs. Of that savings goal, the typical family is currently on track to cover just 30 percent. To make up the difference, families will look to additional funding options such as loans, grants and scholarships, either through financial aid programs or other sources. Although more than three-fourths of parents (78 percent) don’t want to burden their children with hefty student loans, in many cases it may be unavoidable; recent reports find graduates leave school with an average of $25,250 in student loan debt .
“With college costs increasing an average of 5 percent every year , saving enough for a child’s education will continue to be a challenge for many families,” said Keith Bernhardt, vice president of college planning at Fidelity Investments. “More than ever, it’s critically important for families to review their college goals and savings strategies early and make adjustments to avoid burdens brought on by large amounts of post-graduation debt.”
Parents Encouraging Majors with High Expectations for Earning Potential
This year’s study asked parents of children already in college or starting college this fall about their expectations for their future graduates. Forty-two percent of these parents have encouraged their children to focus on a particular major in hopes of securing a higher paying job after graduation.
The most recommended majors:
• Computer science
Parents who encouraged a specific major anticipate their child will earn an average of $70,300 upon graduation. However, industry reports find the average starting salary for Class of 2012 graduates to be $44,442 . Seventy-eight percent of parents report they are optimistic that their children will secure a job in their field of choice within six months. Twenty-three percent believe their children will find a job before they graduate.
Families Continue to Seek Guidance, Save for College Using Dedicated Accounts
While many families are still behind in reaching their college savings goals, the percentage of families saving for college (66 percent) has held steady over the past three years. Familiarity with 529 college savings plans continues to rise (54 percent, up from 51 percent in 2011, and from 40 percent three years ago) and more than a third (34 percent) of families using these accounts have increased their regular, monthly contributions since first opening their accounts (up from 25 percent last year).
One-third of parents (33 percent) work with financial advisors to help guide their college savings strategies, and these parents are increasingly asking for advice related to school selection, financial aid, the grant process, and how college costs should be divided between parents and children. The majority of families (68 percent) who work with advisors feel they are closer to achieving their college savings goals than they would be if working on their own.
“Financial advisors can play an important role in helping parents and children have critical conversations about college decision making and post-graduate plans -- including aligning college selection, savings strategies and plans to pay down any post-graduate debt,” said Matt Golden, vice president, college savings for Fidelity Financial Advisors Solutions, “Engaging college-bound children in these conversations – along with their parents -- also serves as a first opportunity to build relationships with the next generation of clients.”
Fidelity Resources for Families and the Financial Advisors Who Serve Them
Fidelity offers complimentary financial guidance provided by dedicated college planning professionals and access to college planning seminars at 171 Investor Centers across the country. Parents also can visit Fidelity.com/college to access online planning tools, research college savings options and learn how to search and apply for financial aid and scholarships. Additionally, there are a series of Viewpoints articles on Fidelity.com focused on college savings strategies and decision making, including:
• Five steps to take five years before college, updated with insights on how to make the most of financial aid, grants, scholarships and loans.
• The ABC’s of 529 college savings plans, outlining the range of investment options and potential tax advantages of 529 College Savings Plans
Fidelity also provides financial advisor clients with 529 plan information, marketing support and online planning tools such as the 529 State Tax Deduction Calculator and the College Savings Planning tool. For more information about Fidelity’s college savings resources, financial advisors can visit advisor.fidelity.com/529 or call Fidelity at 1-800-544-9999.
Full results of the sixth annual College Savings Indicator Study are available in Fidelity’s online news center.
About the Fidelity College Savings Indicator