Among all of these parents, however, they're saving just $3,000 a year. That's up from $1,500 in 2007, but still fairly low when parents plan to pay for 70% of their child's college education -- compared to just 57% in 2012. With 80% saying that their own experience with paying for college and managing student loan debt are driving their decision, it's little surprise that, as HSBC Group discovered, 60% of parents would be willing to go into debt to fund their child's college education.
With 98% of U.S. parents looking to send their kids to college, parents are willing to take a big hit. Roughly 60% of parents say that paying for their child's education makes it more difficult to keep up with other financial commitments, but they consider student loan debt than long-term savings (40%), credit card repayment (37%) and retirement savings (37%). As a result, U.S. parents spend an average of $14,678 a year to fund their child's college education, or almost double the global average of $7,631. Even at that, students are stuck paying 37% of college costs, second only to students in Canada (39%) and well more than their contemporaries in Egypt (less than 1%), India (1%), Hong Kong (4%) and Singapore (5%).
"The financial sacrifices that parents are willing to make to fund their children's education are proof of the unquestioning support they will give to help them achieve their ambitions," says Charlie Nunn, HSBC group's global head of wealth management. "However, parents need to make sure that this financial investment is not made to the detriment of their own future wellbeing."
That's where the 529 comes in. Parents saving in a 529 plan are contributing a median of $3,500 per year, with 45% boosting their contributions within the last year. Even those increases aren't helping, as 49% of parents think they won't hit their savings goal.
Yet parents aren't giving up. Bankrate.com found that 73% of U.S. workers consider college to be a good investment, including 88% of those ages 18 to 25. College-educated parents are particularly adamant about sending their kids to college, with nearly 90% of college graduates saying their education was worth the cost.
"Making an investment in higher education can lead to greater opportunities with larger income potential," says Steve Pounds, Bankrate's personal finance analyst. "However, with the current tuition prices people need to mindful of the return on their investment and making sure they can manage any debt incurred."
The average 2016 college graduate is carrying $37,172 in student loan debt, according to college and scholarship site Cappex. That's up 6% from 2015, with debt carried by 70.1% of all graduates. That's also up from $12,759 two decades ago, when just 54% of all students graduated with debt.
According to the Federal Reserve Bank of New York, total student loan debt reached $1.21 trillion by the end of 2016. That's up $78 billion from a year earlier and is the second largest pile of U.S. consumer debt behind mortgage debt (at $8.48 trillion, up $231 billion from a year ago). More than one in ten student loans are past due. That's a worse delinquency rate that for credit card bills, of which 7% are past due.
Despite the cost, it's still infinitely more expensive to forego college than to get a degree and pay off your debts. According to a 2014 study by Pew Research Center, those who graduated with bachelor's degrees or better saw their unemployment rate drop to 2.5% compared to 4.4% for those with some college education or an associate's degree or 5.2% for high school graduates. More than 70% of those with bachelor's degrees or better are employed, compared to 54% to 64% of those without said degrees. Perhaps most importantly, the median annual income of college graduates ranged from $57,200 for those with a bachelor's degree to $85,228 for those with professional degrees. That's compared to $37,436 for high school graduates and roughly $40,000 for those with some college or an associate's degree.
It's why many parents are embracing opportunities that either weren't available when they were in college or that they didn't take complete advantage of. Parents with older kids in 10th grade and up wish that they had opened 529 account sooner, treated college savings like a monthly bill, boosted college savings by 1% or more each year and opened a cash-back card with rewards funneled into a college savings account.
Most importantly, they wish they could have saved more each month. With 50% saying they could have saved $50 extra each month and 46% saying they could have put away and extra $100, Fidelity notes that even those small additions can add up over time. Putting $50 more toward college at 6% interest gives parents $19,368 over 18 years. Bump that up to $100 more, and you have an extra $38,735. $200? That turns into $77,471.
"For many families, finding an extra $50 or $100 per month may seem out of reach, but these extra dollars could potentially boost college savings by nearly $20,000 or even $40,000," Bernhardt says. "This potential could be a powerful motivator to consider strategies to carve out additional savings."
Editors' pick: Originally published May 5.