HOW AMERICA SAVES FOR COLLEGE 2015
Sallie Mae’s National Study of Parents with Children under Age 18
Conducted by Ipsos Public Affairs
DATE
Confidential and proprietary information © 2015 Sallie Mae Bank All
Allrights
rightsreserved.
reserved.
Agenda
Introduction and Study Background
► College Value and Savings Sentiment
► Savings Fluctuate
► How Families Save for College
► The Role of Planning
► Parents Who Don’t Save
► Conclusion
►
2
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Background
Study Objective
►
To understand how American families are planning to pay for their
children’s higher education
– Over time, track trends in parents’ behaviors and attitudes related to
planning for college costs—including how and how much they save—long
before purchase and enrollment
Process
►
►
Fifth wave of the study since 2009
Quantitative online survey conducted January 2015
– 1,988 parents of children with at least one child under age 18 and who
believe there is some likelihood their child(ren) will attend college
3
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
How America Saves for College 2015 Media Coverage: 1B impressions and counting
“Report: US families saving less for
college”
“Middle-Class Families Shrink Their
College Fund Contributions”
“College savings take a dive –
study”
“Less than half of parents save for kids’
college education”
“Families saving less for college,
investing poorly”
“Fewer Parents Are Saving for
College”
“Parents Are Saving Less for College”
“Parents want this for their kids, but
can't save enough”
“Most parents aren’t saving money for
kids’ college education”
“Most parents aren’t saving money for
kids’ college education”
“Nearly half of American families are neither
planning nor saving for one of the biggest expenses
they'll face”
“Families saving less for college, investing
poorly”
“4 Ways to Grow a College Savings Account
Quickly”
“Report: College Savings Down
25% (Parents, We Mean You)”
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
“How Parents Feel About Affording College: Pick
a Synonym for Scared”
4
Research
College Value and Saving Sentiment
5
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
Parents believe in the value of college, and expect their child will attend
►
89% of parents believe college is an investment
in their child’s future.
►
93% of parents believe their child(ren) is likely to
attend some form of higher education.
►
Families saving for college are more likely to
believe in the value of higher education than
families not saving for college.
6
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
More college savers agree with all values statements than non-college savers
Agreement with Reasons for Attending College
100%
90%
95%
91%
90%
88%
85%
84%
80%
80%
76%
78%
77%
71%
70%
60%
55%
50%
40%
30%
20%
10%
0%
Earn more money
American dream
Stretch financially
College Savers
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Investment in future
Non-College Savers
Experience regardless of Degree more important
earnings
now
7
59% of parents feel some trepidation about saving for college
•
On average, 29% of
parents feel overwhelmed,
29% feel worried, and
28% feel frustrated they
won’t have enough saved
to meet the cost of
college
•
Parents who are not
saving are nearly
twice as likely as college
savers to express
these sentiments
8
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Parents juggle feeling overwhelmed with feeling it’s the right thing to do
•
On average, 25% of parents
feel saving for college is
the right thing to do, and
18% feel confident in their
ability to save.
•
Parents who have started
saving for college are more
than three times more likely
than non-savers to express
positive sentiments
9
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
Savings Fluctuate
10
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
About half of families continue to save for college
Average value of savings earmarked for college
remains around 10% of total savings
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Proportion of parents saving
for college, year-over-year
11
College savings are a priority
Top 5 Goals for Which Families are Saving
Emergencies/Rainy Day
Saving for college
ranks fourth in
proportion of
families saving,
but second
(behind retirement)
in amount saved
59%
General savings
54%
Retirement
52%
College
48%
Vacation
36%
0%
10%
20%
30%
40%
50%
60%
70%
Proportion of Families Saving
12
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
Families with more time and higher earnings, have more college savings
2015 Average Amounts Saved for
College, by Income
$25,000
2015 Average Amounts Saved for
College, by Age of Oldest Child
$25,000
$22,652
$20,000
$20,000
$14,790
$15,000
$15,000
$10,000
$10,040
$8,983
$10,000
$7,602
$6,010
$6,915
$5,000
$5,000
$2,574
$0
Age 0-6
$Total
Low income
Mid income
High income
Age 7-12
Age 13-17
Age 18+
Age of Oldest Child
13
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
How Parents are Saving for College
14
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
Most frequently used vehicle continues to be a general savings account
Use of College Savings Vehicles, Year-over-Year
10%
9%
UGMA/UTMA
69% of savers use
only one vehicle to
save for college.
11%
11%
Trust
Juvenile life insurance
12%
11%
Coverdell ESA/Ed IRA
11%
Prepaid state plan
13%
12%
14%
15%
14%
US savings bonds
16%
15%
CDs
Rewards program
18%
15%
Investments
17%
20%
24%
23%
Checking account
529 plan
27%
29%
45%
General savings
Some other way
21%
16%
0%
10%
48%
20%
30%
40%
50%
Proportion of Parents Using Each Vehicle
2014
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
2015
15
Nearly one-third of the money saved for college in the U.S. is in 529 plans
Average Amount Saved, by Vehicle, among All 2015 College Savers
UGMA/UTMA
$183
Trust
$209
Juvenile life insurance
$244
Coverdell ESA/ Ed IRA
$296
Prepaid state plan
$407
US savings bonds
$180
CDs
$1,053
Rewards program
$232
Investments
$1,580
Checking account
$534
529 plan
$3,089
General savings
$1,638
Some other way
$395
$-
$500
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
16
Savings vehicle choices differ by income
Proportion of College Funds in Top Six Vehicles, by Income
45%
41%
40%
35%
30%
29%
25%
20%
20%
19%
20%
18%
15%
15%
13%
13%
9%
10%
8%
5%
6%
5%
5%
5%
3%
5%
2%
0%
General savings
529 plan
Checking account
Low-income
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Mid-income
Investments
High-income
Rewards program
CDs
17
Many “college” savers may not use their savings for college
Savings Intent
100%
90%
80%
43%
51%
48%
49%
48%
50%
50%
49%
52%
51%
52%
50%
50%
Trust
CDs - online
CDs - local bank
Investments
70%
54%
60%
50%
40%
30%
57%
20%
46%
10%
0%
General savings - General savings - US savings bonds
local bank
online
Savings Intended for College
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Savings Could Be Used for College if Needed
Checking account
18
Families are adopting behaviors to facilitate the process of saving
Keeping College Savings on Track, Year-over-Year
19
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Most parents say they are saving the same amount this year as they were last year
20
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Both goal- and process-oriented strategies can lead to saving success
21
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
The Role of Planning
22
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
The Importance of Planning-to-Pay for College
►
Families with a plan to pay for all years of
college enjoy these benefits:
– They are able to spend more, thus take
advantage of more options
– Families are less likely to restrict school choice
– Students in these families are more likely to
attend full time and pursue a BA
– Students in these families borrow less
– Parents are less worried about economic factors
that could restrict their child’s future enrollment
23
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
57% of parents are either saving or have created a plan for how to pay for college
24
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Planners feel more confident and save more money than non-planners
Average Amount Saved for College
• 30% saving parents with a
plan use a 529 plan
• 20% of non-planning
savers use a 529 plan
• 62% of parents with a plan
started saving before their
child was 6 years old
• 51% of those without a
plan started saving before
their child was 6 years old
• 69% of planners feel
confident they can meet the
future cost of college vs
23% of non-planners
$12,000
$11,102
$10,000
$7,610
$8,000
$6,000
$4,000
$2,000
$0
Planners
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Non-planners
25
Planning activities outside of saving
►
Child opening his/her own savings account
(31%)
►
Research college costs (30%)
►
Research financial aid (28%)
►
Invest in a child’s skills to increase his/her
chance of winning scholarships (28%)
►
Discussed with other parents how they paid for
college (21%)
►
Limit college choice based on cost (17%)
26
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Savers and non-college savers differ on funding future college costs
Expected Sources of Funds for Future College Costs
27
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
Preparing the child for the reality of college costs
►
►
►
41% of parents have
discussed paying for
college with their child
55% of parents of teens
have discussed paying
for college with their
child
Among those who
haven’t, 31% will
discuss when child is
aged 16-18, 32% “aren’t
sure” when; 6% of
parents of teens don’t
plan to discuss at all
Top 5 topics discussed with child:
► Importance of earning
scholarships (55%)
► Type of college able to choose
based on cost (41%)
► Student loans (40%)
► Work-study/employment while
in college (35%)
► Importance of graduating on
time (32%)
28
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
Families Not Saving for College
29
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
Top five reasons* why families aren’t saving for college
I’m focusing on
other saving
priorities
50%
*combined major and minor reasons
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
30
Profile of a non-college-saving parent
Parents not saving for college are more likely to:
► Have HHI <$50k
► Attained highest education level of high school
► Have child with split living arrangements between
parents
► Be ages 35-54
…while those saving for college are more likely to:
► Be a millennial
► Say child is “extremely likely” to attend college
► Have HHI >$100k
► Have a BA degree
► Have child with own savings account
► Have discussed paying for college with their child
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
31
Parents of younger children are more likely to be planning to begin saving
Non-savers' Plan to Begin Saving for College, by Age of Child
100%
90%
27%
80%
70%
42%
42%
7%
60%
10%
50%
19%
44%
40%
9%
36%
30%
66%
20%
10%
39%
48%
22%
30%
12%
0%
Ages 0-6
Ages 7-12
Within one year
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Within five years
Ages 13-17
Neither
Not sure
32
Summary findings
►
►
►
►
►
►
Families value higher education, but worry
about cost
College savings are down this year
Savings are concentrated—69% of families
use only one savings vehicle
College savers are adopting behaviors, such
as automated deposit, that make saving
routine
Different types of savers define success
differently
Planners save considerably more than savers
without a plan
33
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Sallie Mae encourages families to save for college by following this 1-2-3 approach…
1.
2.
3.
Open a savings account. Set up and designate a savings
account as your college fund. Deposit gifts from friends and family,
and sign up for free services that let you earn cash back to save
for college.
Make regular contributions. Set a goal, and create a routine of
adding money. Even a little bit adds up over time, and automatic
deposits make saving easy.
Explore tax-advantaged options. Put your money to work using
dedicated college savings programs like Coverdell Education
Savings Accounts, prepaid state college savings plans, and 529
college savings plans.
34
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Research
SallieMae.com/HowAmericaSaves
35
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.
The information contained in this presentation is not
comprehensive, is subject to constant change, and
therefore should serve only as general, background
information for further investigation and study related
to the subject matter and the specific factual
circumstances being considered or evaluated. Nothing
in this presentation constitutes or is designed to
constitute legal advice.
(MKT10974)
Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.