College-Saving Families Flying Blind

Parents Flying Blind Saving for College

Bats are known for having notoriously bad eye-sight. But they compensate by using a built-in sonar system. According to a recent Fidelity survey, parents are pretty much acting like bats when it comes to college finances. College-saving families are flying blind when it comes to understanding the financial aid process, how much college may cost, and how much and where they should be saving for college.

College-Saving Families Flying Blind

According to the survey of nearly 1,900 families, the study notes that most underestimate the sticker price of a four-year college education by an average of $100,000.

Most families figure that their students will be assuming debt of about $45,000 or about 23% of the total cost on average. This doesn’t include whatever debt the parents may be assuming directly to pay for college. And most believe that 20% of college costs will be covered by scholarships with the balance covered by family savings, cash flow and parental loans.

529 Plans Help Fill Gap

The good news is that more and more families (76%) are familiar with 529 College Savings Plans even if they don’t fully understand the benefits. A 529 College Savings Plan allows participants to save money that can accumulate without taxes on gains or dividends and then allows parents to withdraw funds without paying taxes if used for qualified educational expenses.

While the average contribution to 529 accounts is around $300 per month, parents are falling short of what may actually be needed given the current estimated costs for a four-year public college is around $28,000 (including housing, books, fees, and travel). With the average inflation adjustment that is north of 4% per year, costs will likely double by the time a two-year old enters college.

College-Saving Families Need Planning Help

This lack of knowledge exposes families to more than just the risk that they will fall short paying for college. It also is a risk that the parents may not be able to live as well as they want to in retirement. Why? Because every dollar directed toward college means less available to save for retirement. Parents will be better prepared if they sit down and prepare a holistic plan that takes into account current and projected family cash flows, proper use of grandparent gifts, taxes, and the impact of income and asset strategies to lower the Expected Family Contribution (EFC). And a good plan will also include matching a student with a school where the student is likely to garner more aid and fewer loans.

For more details on the Fidelity survey, visit this Financial Advisor magazine article.

At least bats use echo-location to be their GPS. Now, all parents need to do is get their own GPS to navigate college finances by bringing onto their team a qualified college financial planner long before their child sits for the SATs so that they, too, won’t be flying blind when it comes to college saving.

If you’d like an objective second opinion about your finances or help putting together a family funding plan for college, please reach out to Steve Stanganelli, CFP®, CRPC®, AEP® of and Clear View Wealth Advisors, LLC. Call or email