Rising tuition and an uncertain economy could be casting doubts over the value of investing in a college education, according to a COUNTRY® Financial survey. The number of Americans who think college is a good financial investment plunged to 64 percent, down 16 points from last year and 17 points from 2008.
The sentiment about higher education coincides with a shift in saving priorities. In a reversal from last year, most Americans say their own retirement (43 percent) is more important than saving for their child's college (41 percent). Those who picked retirement first increased two points from last year, while those who say their child's education is the top priority dropped 6 points. Those who say they are unsure about what's more important increased four points to 17 percent.
"It's understandable why Americans are questioning how to prioritize college education and retirement funding, particularly with the skyrocketing costs in both areas. But with graduates likely to earn $1 million (according to the U.S. Census Bureau) more in their lifetime than non-grads, college remains an important investment in a family's future despite the rising price tag", said Keith Brannan, vice president of Financial Security Planning for COUNTRY Financial. "The good news, however, is that people are putting their retirement savings first. You can always borrow to pay for college, but you can't borrow for retirement. With the proper planning, Americans can achieve their financial goals for both."
Borrowing for college
Nearly one-third (31 percent) of Americans borrowed money to pay for their education, 64 percent of whom have completed paying off their loans. Further, of those who borrowed, half say it had little to no impact on other life decisions like marriage or buying a home. Twenty-eight percent say it had somewhat of an impact and 20 percent say it had a large impact.
Should parents foot the bill?
A majority (65 percent) of Americans say parents should be responsible for paying part of their child's college education. Eighteen percent believe parents should foot the entire bill, while 13 percent think parents should not pay for any college costs. Younger Americans, age 18-29, were most likely to say parents shouldn't have to finance the cost of higher education for their children (15 percent).
"No matter how much you choose to pay for your child's education, planning is the key", adds Brannan. "Most families can pay for college and achieve other long-term goals, no matter where they're starting from."
Tips to help parents with college planning
- Try to find alternate ways to pay for an education, like grants or low-interest loans. In many cases, you can also qualify for tax breaks like the American Opportunity Credit, Lifetime Learning Credit, and student loan interest deductions. Community college can be a cheaper option as well.
- Financial aid formulas typically weight the student's savings more heavily, so make sure you are saving money in your name rather than your child's name.
- If your child has already been accepted to college, be proactive with the school's financial aid office if you experience major life changes like job loss or a steep decline in home value. In some cases, schools can work to find additional sources of financial support even after your child starts attending.
- Contributing the maximum amount to your retirement accounts can help you in several ways. First, you will have less taxable income, which means you could be eligible for a higher amount of financial aid. Also, if you need cash in a hurry, you can dial back the amount you contribute and use that money to meet your immediate needs.