NEWARK, Del.--(BUSINESS WIRE)--The number of parents saving for college and the amounts they are saving are at four-year highs, according to “How America Saves for College 2016,” the national study released today by Sallie Mae — the nation’s saving, planning, and paying for college company — and Ipsos, an independent global market research company.
“How America Saves for College 2016” finds that 57 percent of parents are saving for college, up from 48 percent in 2015, and the average amount they have saved is $16,380, up from $10,040 last year. More than half (55 percent) of parents feel confident they will be able to meet the cost of college, up from 42 percent in 2015. In addition, 88 percent of parents who have set a savings goal are confident they will meet their goal. Nearly half of parents with a goal (46 percent) are making saving for college a habit by using auto-deposit.
“The higher levels of optimism, confidence, and savings evident in this research correspond with other economic trends we are seeing, such as declines in unemployment and increased optimism about the economy among the U.S. public,” said Julia Clark, senior vice president, Ipsos Public Affairs. “The findings from this year’s study really highlight the different ways that different generations view and value a college education — and, critically, their differing approaches to financial planning when it comes to their children’s future.”
Millennials committed to saving for college
Millennial parents — age 35 or younger — feel more confident (64 percent) than other generations about meeting the cost of college and they are more committed to saving for college. More Millennials are saving (65 percent, vs. 50 percent of Gen X parents and 61 percent of Baby Boomer parents), and Millennials have saved more money ($20,155, on average, vs. $12,428 for Gen Xers and $18,323 for Baby Boomers). Forty-four percent of Millennial parents are using 529 plans, compared with 36 percent of Gen Xers and 23 percent of Baby Boomers. When it comes to paying for college, nearly four in ten (38 percent) Millennial parents believe the parent should be solely responsible, compared to 26 percent of Gen Xers and 18 percent of Baby Boomers.
Use of 529 college savings plans improving but still far behind
While use of 529 college savings plans among parents rose to 37 percent, up from 27 percent the prior year, these tax-advantaged plans still lag far behind general savings accounts, despite the fact that those who use 529 plans save roughly 25 percent more, on average. More than six in 10 parents (61 percent) use general savings accounts and 38 percent use checking accounts to save for college. More than half of the parents saving for college but not using 529 plans say they are not aware of these tax-advantaged plans.
More than half of parents have a plan to pay for college
The proportion of parents with a plan to pay for college rose to 51 percent in 2016, up from 42 percent in 2015, and the highest in the history of the study. Parents with a plan save significantly more for college: $18,389, on average, compared to the $10,468 reported by parents who don’t have plans. Parents are also optimistic that having a plan will ensure their child attends college. Nearly three-quarters (71 percent) agree students are more likely to attend college if they know some college savings have been set aside for them. In addition, the majority of parents (85 percent) are willing to stretch themselves financially to make college happen.
“Preparing for college requires a significant personal and financial commitment, and it is very gratifying to see so many parents, and especially younger parents, taking proactive measures to make college possible and more affordable,” said Raymond J. Quinlan, chairman and CEO, Sallie Mae. “The attitudes and actions revealed in ‘How America Saves for College 2016’ are tangible evidence of the value parents ascribe to higher education.”
“How America Saves for College 2016” reports the results of online interviews Ipsos conducted in May and June 2016 of nearly 2,000 American parents with at least one child younger than age 18. The report and a related infographic are available at www.SallieMae.com/HowAmericaSavesForCollege.
Sallie Mae recommends the 1-2-3 approach to saving for college: first, open a savings account; second, set a goal and make deposits regularly; and third, explore tax-advantaged options such as 529 college savings plans.
Ipsos is an independent market research company controlled and managed by research professionals. Founded in France in 1975, Ipsos has grown into a worldwide research group with a strong presence in all key markets, and is the world’s third largest survey-based market research company. Ipsos delivers insightful expertise across five research specializations: advertising, customer loyalty, marketing, media, and public affairs research. Ipsos has been listed on the Paris Stock Exchange since 1999 and generated global revenues of €1.785 billion (1.990 billion USD) in 2015. Visit http://www.ipsos-na.com to learn more.
About Sallie Mae
Sallie Mae (NASDAQ: SLM) is the nation’s saving, planning, and paying for college company. Whether college is a long way off or just around the corner, Sallie Mae offers products that promote responsible personal finance, including private education loans, Upromise rewards, scholarship search, college financial planning tools, and online retail banking. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.