As rapidly rising college costs and mounting student loan debt become another campaign issue in the days leading up to the presidential election, more families are stepping up to cover the costs themselves.
The number of parents saving for college is at a four-year high, with 57 percent of parents putting money aside for their child’s education. That’s up from 48 percent last year, according to education lender Sallie Mae’s new “How America Saves for College 2016” report, which surveyed 1,959 parents between May 26 and June 6.
More than half of parents, or 51 percent, said they have a plan for how to pay for all four years of college, up from 42 percent in 2015 and the highest in the study’s history.
Although the use of 529 college savings plans, which offer tax-advantaged investments to pay for qualified education expenses, is on the rise, 6 in 10 parents are stashing that cash in low-yield general savings options, Sallie Mae said. The average annual yield on such accounts is a mere 0.11 percent, according to Bankrate.
To that end, parents are saving more, socking away $16,380 on average, which is also a four-year high and up from $10,040 in the year earlier.
In fact, 529 savings plan assets rose to a record $242.7 billion as of June 30, a 3.4 percent increase from a year ago, according to a separate report by financial research firm Strategic Insight.
But there is a ways to go. Families with students in four-year public colleges shelled out more than $19,500 in 2015-16; at four-year private colleges, it was about $43,900, according to the College Board.
To bridge the gap, parents are also relying on loans, scholarships and grants more than ever before.
Aid such as income-based federal Pell grants covered 34 percent of college costs in 2015-16, up from 30 percent in the previous school year, according to a separate report by Sallie Mae.
The second-highest proportion came from parent income and savings, followed by borrowed money, which covered 20 percent of college expenses in 2015-16. Overall, 2 in 5 families borrowed money to pay for college during this school year, Sallie Mae officials said.
Collectively, Americans owe nearly $1.3 trillion in student loans, more than any other type of consumer debt except mortgages.