Higher Education in Reach, Though Families Need to Do Better Job Saving

In reality, affording a college education is much more within reach than parents and teens think. The median amount that parents say they would be able to pay annually for their child to go to college is nearly $10,000, an amount that would cover the average tuition costs of a public college or university, according to the College Board. However, more than one in five parents (22 percent) admits to having nothing saved for their child ’s college education.

• The average American parent of a child expected to go to college has saved only one tenth of the total anticipated costs of the child's college education.
• The "median college preparedness ratio", which compares parents ’ current savings for their children ’s college education with its anticipated costs, is notably lower among single parents and those living in rural areas.

Among the findings:

• Parents overestimate annual tuition and fees for a public, four-year university by more than four times the amount estimated by the College Board ($25,155 vs. $5,836), and those for a private four-year college or university by more than twice the College Board estimates ($46,712 vs. $22,218).
• Less than half (44 percent) of parents are familiar with Section 529 plans, and only 12 percent are relying on them to finance their children ’s college education.
• Instead, many parents are more likely to depend on federal loans (34 percent) and academic scholarships (32 percent), followed by private loans (23 percent) and 401k retirement plans (21 percent).
• More than half of parents (56 percent) and two-thirds of teens (66 percent) see a college education as a necessity for a rewarding career and larger proportions of both parents and teens (68 percent and 72 percent) agree that it is needed to achieve a high income.

Hispanics, African Americans and Women Most Likely to View College as Necessary for a Rewarding Career and High Income

Hispanics (97 percent), African-Americans (91 percent) and women (88 percent) and 85 percent of all parents agree that a college education is worth the expense.

Adult and teen women are significantly more likely than their male counterparts to perceive a larger payoff to pursuing higher education, which could explain why the number of women in college has been on the rise —with women accounting for 56 percent of the overall student population in 2006.

• Sixty-two percent of mothers vs. 48 percent of fathers believe a college education is needed for a promising career. Seventy-three percent of mothers vs. 60 percent of fathers believe college is needed to achieve a high income.
• Teenage girls are more likely than boys to agree a college education is needed to achieve a high income (78 percent vs. 68 percent).

Saving for College a Top Priority

Saving for college is seen as a top priority overall with many parents and teens (41 percent and 43 percent, respectively) having reported they would use a $10,000 windfall for college savings as opposed to day-to-day expenses (26 percent and 17 percent), retirement savings (21 percent and 1 percent), vacations (7 percent and 10 percent) or shopping sprees (2 percent and 13 percent). Furthermore, parents and teens expressed high levels of agreement that parents should start saving for college when their children are young, seeing it as more of a duty than a choice.

Despite Saving Early, Many Families “Unprepared ” for College Costs

Still, while seven in ten parents say they started preparing for college costs early (before their child was in high school), only 36 percent of parents and just 10 percent of teens say they are very or extremely well prepared. Both parents (64 percent) and teens (77 percent) cite the inability to afford the expense of college as the main reason some children do not attend. Fifty percent of teens and 41 percent of parents cite the inability to afford college as the main reason for dropping out.

Study Methodology

The Upromise College Preparedness Study consisted of a nationwide survey of 1,400 parents with a child under the age of 25 conducted via telephone interviews from July 24-August 12, 2007 by Ipsos Public Affairs. National random sample representative of the U.S. population of adults aged 18 and over who have at least one child under the age of 25.

The Study also included a nationwide, online survey of 759 teenagers aged 15-18 who have not started college, conducted August 10-17, 2007 and hosted on Ipsos ’ own interviewing platform. The sample is reflective of the demographic profile (age, gender, region, ethnicity, etc.) of U.S. teens aged 15-18 who have not started college; drawn from Ipsos ’ U.S. online panel.

The margin of sampling error (with 95% confidence level) is of ±2.6 percentage points for results among all parents surveyed and of ±3.6 percentage points for results among all teens aged 15-18 surveyed.