How America Saves for College 2013: A National Study by Sallie Mae and Ipsos

Sallie Mae and Ipsos have recently released the results of an ongoing study of how families plan to pay for college. This latest report shows a decline in the number of families saving for college and the amount they are saving. The study also shows that while most American families expect their children to attend college and are optimistic about their ability to save for it, three in five families do not have a solid plan for how they will pay for college. A savings gap exists between the amount families expect to save and the amount they are likely to save. Additionally, the report indicates that parents have unrealistic expectations for the amount of money their family will receive from financial aid and/or scholarships to offset the probable cost of college.

Among the report’s findings:

• In 2010, 60% of families interviewed reported saving for college. In 2012, 50% reported saving for college.
  • Families are saving an average of $10,000 less than they were in 2010.
  • Since the recession, parents are more likely to save for short-term goals (such as paying rent or repairing their car) over longer-term goals (such as retirement or college tuition).
• Half of families might be saving specifically for college, but many are not saving in college-specific accounts.
  • General savings accounts or CDs were the most popular vehicles for savings (especially for low-income families), while other common savings means included a “rainy day” fund or a retirement account.
• According to a calculation based on a families’ current savings habits, middle-income families will save only half of what they expect to save to send their children to college while low-income parents will save only one-third of what they had planned to save.
• The report finds that while families generally understand that  how they will pay for college is divided among their own savings, grants and scholarships their child might receive, and student loans,  they overestimate how much will come from grants and scholarships and underestimate how much will have to be paid for with savings and loans.
• Over half of parents surveyed plan to start saving within the next five years because they don’t believe starting saving in the next year is financially feasible.
  • Many families cite loss in income, unexpected expenses and higher cost of living as reasons they are not able to save in the immediate future or saved less this year than in previous years.