Fidelity^® Study Finds Significant Shifts Over Five-Year Period in How Families Tackle Rising College Costs

Fifth Annual College Savings Indicator Study Finds Parents Projected
To Meet Only 16 Percent of College Costs, Despite Improved Savings Habits

BOSTON – Fidelity Investments^®, a leader in helping families save for college, today announced the results of its fifth annual College Savings Indicator study, which found significant shifts in savings behavior from 2007 to 2011, with more families: 1) starting to save in the preschool years despite financial pressures, 2) seeking guidance and saving for college using a dedicated account, such as a tax-advantaged 529 college savings plan, and 3) making shared sacrifices to achieve their college savings goals.

The study features the College Savings Indicator, a calculation of the percentage of projected college costs the typical American family is on track to cover, based on its current and expected savings. After four consecutive years of decline, the Indicator held steady to the prior year at 16 percent, down from 24 percent in 2007, when Fidelity first launched the study. While overall preparedness has declined, a larger percentage of parents -- more than two-thirds (67 percent) -- have begun saving for college costs, compared with 58 percent five years ago.“Families are planning earlier and saving more efficiently, yet with college costs increasing 26 percent in a five-year period,ⁱ saving for college will continue to be a challenge,” said Joseph Ciccariello, vice president, Fidelity Investments College Planning. “Working with an expert to map out a savings strategy early -- and setting up a dedicated account like a 529 plan -- can help parents better prepare for rising college costs.”

1) Starting to Save in the Preschool Years Despite Financial Pressures
Forty percent of parents with preschool-aged children (ages 0-5) have started saving for college costs in a dedicated account -- up from 27 percent in 2007, with most parents (53 percent) saying they were prompted to do so by the birth of a child. Parents may be saving earlier because fewer parents (48 percent, down from 70 percent in 2008ⁱⁱ) believe they will receive a student loan for the full amount needed to pay for college.

“Preschool parents” are saving for college despite the fact that 60 percent of them are still paying back their own student loans and nearly half (48 percent) are paying, on average, $576 per month for preschool or day care.

Many of these parents will experience a cash inflow when they no longer have to pay preschool or day care expenses, assuming a child attends public elementary school . Sixty percent of these parents are planning to allocate some of that money toward saving for college.

“The preschool-to-kindergarten transition is the perfect time for parents to reallocate ‘found’ money toward other savings priorities -- like college and retirement -- and pay down debt,” said Ciccariello.
For families with children closer to college age, Fidelity today issued a Viewpoint article which highlights “five steps to take five years before college.” This includes insights on how to make the most of financial aid, grants, scholarships and loans.

2) Seeking Guidance and Saving for College Using a Dedicated Account, Such as a 529 College Savings Plan

Among parents who have started saving for college, 37 percent are using a dedicated college savings account like a 529 plan, up from 26 percent in 2007. One-third of parents (33 percent) are turning to financial professionals to help guide their college savings decisions, an increase from 21 percent five years ago.

“One statistic that hasn’t fluctuated in five years of tracking attitudes toward college savings is that 80 percent of parents believe that a college education is a minimum requirement for a decent job,” said Matt Golden, vice president, Fidelity Financial Advisor Solutions College Planning. “This is why more financial advisors are providing advice around financing that critical degree, and recommending a 529 plan as a tax-advantaged savings vehicle.”

3) Making Shared Sacrifices to Achieve College Savings Goals
Three-quarters of parents (75 percent) said they do not want to burden their children with college loans (up from 65 percent in 2007). In a five-year period, families have significantly increased their use of a range of strategies for managing college costs and generating additional income.

Strategies	2007	2011
Have a child live at home and commute	38%	48%
Encourage child to attend public college or university	34%	44%
As child to graduate in fewer semesters	13%	44%
Have child work part-time	49%	59%
Ask child to help pay for college	36%	46%
Have non-working spouse go back to work	11%	18%
Parent gets a second job	11%	17%

Taking into account rising costs for higher education and the sacrifices being made over time to save, parents are also telling their college-aged children to “make the grade.” Two-thirds of parents (66 percent) report they will require their child to maintain a certain grade point average (GPA) in order for the parents to fund their child’s education. The average GPA parents say they will require is a 3.1 out of 4.0.

Full results of the fifth annual College Savings Indicator Study are available in Fidelity’s news center at www.Fidelity.com.

Resources for Parents and Financial Advisors
Fidelity offers complimentary financial guidance provided by dedicated college planning professionals and access to college planning seminars at 160 Investor Centers across the country. Parents also can visit Fidelity.com to access online planning tools, research college savings options and learn about how to search and apply for financial aid and scholarships.

Fidelity 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, advisors can visit advisor.fidelity.com/529 or call Fidelity at 1-800-544-9999.

About the Fidelity College Savings Indicator
As part of the study, Fidelity conducted a survey of parents with college-bound children of all ages. Parents provided data on their current and projected household asset levels including college savings, use of an investment advisor and general expectations and attitudes toward financing their children’s college education. Using Fidelity’s proprietary asset-liability modeling engine, the company was able to calculate future college savings levels per household against anticipated college costs. The results provide insight into the financial challenges parents face in saving for college. Data for the Indicator (number of children in household, time to matriculation, school type, current savings and expected future contributions) are collected by Research Data Technology, an independent research firm, through a national online survey of more than 2,300 parents nationwide with children aged 18 and younger who are expected to attend college; who have household incomes of $30,000 a year or more; and who are the financial decision makers in their household. College costs are sourced from the College Board’s Trends in College Pricing 2010. Future assets per household are computed by Strategic Advisers, Inc. (a registered investment adviser and wholly owned subsidiary of FMR LLC). Within Fidelity’s asset-liability model, Monte Carlo simulations are used to estimate future assets at a 75 percent confidence level. The results of the Fidelity College Savings Indicator may not be representative of all parents and students meeting the same criteria as those surveyed for this study.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.6 trillion, including managed assets of $1.6 trillion, as of July 31, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

i College Board, Trends in College Pricing, 2006 and 2010. Data is straight average of four-year public and private school costs.
ii The question was first asked in 2008 vs. 2007, the first year of the study.
iii 89 percent of American students attend public school, U.S. Department of Education, National Center for Education Statistics (2008).

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