"Teenagers should begin to understand how their college-related choices may affect their own financial future, including the potential student loan debt they may face."
Four-in-ten of parents with children ages 15 and up are not having family discussions about the total cost of college which can be critical in managing potential student debt, according to a new Fidelity study.
Forty-one percent of families with college-bound children have not discussed the total cost of college with their children. The total cost includes tuition, room and board, plus additional expenses related to school selection, choice of major, financing options, as well as how these college decisions may affect future earnings, job prospects, and potential student debt.
Among those parents who have taken the time to have this conversation with their college-bound child, more than two-thirds (69 percent) report having made adjustments to their college plans to help address college’s rising costs:
• 44 percent of parents explored additional funding options such as scholarships
• 29 percent of parents opted to send their children to a less expensive school
• 22 percent reported they will rely more heavily on financial aid when it comes time to send their child to school
“Saving and planning for college should be a family affair, said Keith Bernhardt, vice president of college planning at Fidelity Investments, in a statement. “The earlier families discuss goals, the more time they will have to adjust savings strategies and consider the financial impact of their college related choices. Teenagers should begin to understand how their college-related choices may affect their own financial future, including the potential student loan debt they may face. These conversations will help college-bound students become more accountable and better prepare them to make their own future financial decisions.”
Affluent investors put a high premium on their education, ranking it second only to hard work as the primary contributor to their financial success, according to ongoing Spectrem’s Millionaire Corner research. A survey conducted last August found that 84 percent of Affluent investors believe a college education is necessary. This attitude is most keenly felt among the wealthiest of those surveyed. Nearly nine-in-ten (88 percent of those with a net worth of at least $5 million believe a college education is necessary compared with 81 percent of those with a net worth between 4100,000 and $1 million.
Not surprisingly, student debt is a primary concern of parents and recent grads. Nearly eight-in-ten of parents surveyed by Fidelity report they do not want to burden their children with unmanageable student debt. For a majority, though, this may be unavoidable. Seventy-six percent of parents of college-bound children anticipate they will graduate with student debt, averaging $27,800. Of these, they believe it will take nearly eight years to pay it back.
But families that have discussions about the total cost of college are more likely to demonstrate positive saving behaviors, the Fidelity survey found. Eighty-six percent of parents who have held these conversations with their children prior to the age of 15 have started saving. In comparison, only 58 percent of families who have not had this conversation have begun saving for college.
For a productive college conversation started, the Fidelity report recommends parents address the following:
· Understanding the total amount families need to save for college
· Deciding how to involve children in the college saving process
· Evaluating how school choice influences costs and potential student debt
· Learning about the financial aid process
· Calculating a reasonable loan amount
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.