A new report from retirement planning company T. Rowe Price examines the student debt issue facing the nation in an effort to better understand what basic financial knowledge, attitudes and behaviors that parents and their children hold.
The report, “8th Annual Parents, Kids and Money Survey – College Related Findings,” asked questions online of US parents of children between the ages of eight and 14, as well their children. Of the 1,086 parents who participated, around 50% were men and 50% were women.
In terms of existing student debt, 61% of parents responded that they currently hold more than one type of debt, when all types, including credit cards, mortgage, car loan, and other types of debt, were included. In addition, 28% said they have some form of student loan debt, either for themselves of their children, with 5% saying they had both types of student loan debt.
Parents that said they had student loan debt from their own education were also found to have more credit card debt, at 67% in comparison of 54%, as well as payday loan debt, at 19% versus 7%.
While the average amount of student loan debt parents held for themselves was found to be $27,078, the average amount they held for their children was lower at $10,768.
In all, 67% of parents said that saving for their child’s education was more important to their family, in comparison with 33% who felt saving for retirement was a higher priority.
In terms of the age that children should be when parents begin to save for their college education, 47% of parents said five or younger, while 19% believed they could begin saving when their children reached their teenage years. The average age to begin saving was 6.73. The majority of parents, 55%, said they set money aside for their child’s education on a monthly basis. Meanwhile, 24% said they save weekly, 12% save quarterly, 5% save annually, and 1% save every other year. In all, 2% said they do not contribute.
While the majority of parents, 43%, said they save money in a regular savings account, 37% use a 529 savings plan, and 27% use a retirement account. Millennials were found to be less likely than Generation Xers or Baby Boomers to use a 529 account for college savings, with 22% of Millennials doing so in comparison with 42% of Gen Xers and 42% of Baby Boomers.
An overwhelming 69% of parents said they have separate savings accounts for each child.
In all, 65% of parents said they would be able to pay for some of the cost of college, with just 12% believing they could cover the entire cost. Meanwhile, 51% of parents believe student loans will cover the rest. In addition, 70% of parents who are planning to use credit cards to cover remaining cost already carry a month-to-month balance. Just 21% of parents expect their children to work while in school or take out a loan themselves.
When children were asked questions, 67% believe their parents are saving for college. Of that group, 77% have parents who said they were saving, while 23% had parents who are, in fact, not currently saving. A total of 85% of children said they expect to go to college.