Our kids are in trouble. Big trouble. In every other generation in recent history, children have done better than their parents. They get more education, have better jobs, make more money, and live longer. Until now. Children growing up today are in the first generation that will be doing worse than their parents in just about every measurable area. And perhaps the most obvious sign of this changing tide is how families are adjusting their college dreams.
According to the just-released College Savings Indicator study (done by Fidelity Investments), only 31 percent of parents with kids headed for college have adequately considered how much college will cost, the impact of graduating with a crushing debt load, and how the choice of major could affect future employment prospects. Translation, 69 percent have not had the 21st Century version of “the talk.”
Of the parents who have given their kids (and themselves) a financial wakeup call, most have had to change their (and their children’s) plans for the future. Thirty-eight percent of them have decided to go with less-expensive colleges. Twenty-eight percent say they’re counting on getting more financial aid, and 16 percent have leaned on their children to change majors so they can get a better job.
But even these level-headed parents are in a major state of denial.
- On average, parents expect to pay for 57 percent of their kids’ college education. But if you look at how much those families are saving, they’re on track to cover only 30 percent of the costs.
- Seventy-eight percent of families say they don’t want their kids to graduate with a lot of debt. But young grads leave college with an average of more than $25,000 in student loans.
- On average, parents expect their children’s first post-college job will pay $70,300/year. But the average salary actually earned by class of 2012 grads is only $44,442/year.
Average tuition at private colleges, according to the College Board, is just under $28,500, with another $10,089 for room and board. Call that $38,600 total. Frankly, from where I’m sitting, that’s a hell of a bargain. My daughter’s college, the full package is $58,292 ($43,306 for tuition, $12,286 for room and board, and a few thousand more for books and other stuff).
And those costs are going up at a faster clip than inflation. Fortunately, there are signs that sensible thinking about paying for college is becoming more common. For example, according to the Fidelity study, half of parents plan on asking their children—as young as 13—to start socking away money of their own so they can contribute to the expense. In addition, 49 percent of parents say they expect their children to live at home and commute to a local college to save on room and board, which can be a major expense. That’s up from 34% just five years ago. A growing percentage of parents also expect their children to work part-time while taking classes (57%), take fewer years to graduate (27%), and keep their grades up (65%).