The slumping economy is making it tougher for parents to put aside college funds for their kids.
The housing crisis, credit crunch and weaker economy are taking a toll on the ability of parents to put aside college funds for their kids, according to a Fidelity Investments survey released this week.
In a poll of 3,000 U.S. households with college-age children, the Boston-based financial services firm found most parents expected to meet only 21 percent of the total cost of their children’s college education, a three point decline from a similar survey last year.
Among other financial pressures, respondents blamed declining home equity values and tighter credit conditions for preventing them from paying a larger share of tuition fees. Sixty percent of respondents said the rising costs of day-to-day living are making it tougher to maintain college funds, while more than a third said they've either cut the amount of their college savings or stopped entirely. Over a third said they anticipate delaying retirement to help pay for children's education.
At the same time, the survey found college costs were rising at twice the rate of inflation. According to the College Board, an average four-year college education today costs about $120,000. As a result, up to 62 percent of respondents said they'll rely on student loans this year, compared to 53 percent in 2007.
"College graduates have the potential to earn more income and have more options available for employment, which is why it’s critical for parents to remain committed to college savings today, so that their children may have a competitive advantage later in life," said Joe Ciccariello, a vice president at Fidelity Investments.