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College Savings in Massachusetts at an All-Time High, Yet Families Underestimating Future College CostsMassachusetts families are saving for college at an all-time high 74 percent, however, according to findings from the new College Savings IQ survey conducted by Fidelity Investments® and the Massachusetts Educational Financing Authority (MEFA), many parents could benefit from additional education when it comes to savings and planning best practices. This press release features multimedia. View the full release here: http://www.businesswire.com/news/home/20171012005895/en/ College Savings in Massachusetts at an All-Time High, Yet Families Underestimating Future College Costs (Photo: Business Wire) The survey identified knowledge gaps in three categories: 1) the future cost of college and how much they should be saving; 2) how saving for college impacts future financial aid eligibility; and 3) greater awareness of the fundamentals of 529 college savings plans - most notably for Massachusetts parents, that the Commonwealth now offers an annual tax deduction for those contributing to the U.Fund College Investing Plan, the Massachusetts 529 plan.
Parents Committed to Reducing Student Debt, but Underestimate College
Costs Estimating future college costs is not the only area where parents need more guidance. In Massachusetts, nearly half (47 percent) of parents admit they do not have a good idea regarding exactly how much they should be saving each month. "Pinpointing how much you should save can feel like a moving target - especially when your kids are young and college goals for your child's education may be more undefined," says Keith Bernhardt, vice president of college planning at Fidelity. "But the key is to get started. Set a reasonable goal to start building your college fund, and then take advantage of free and simple to use tools available online to refine your savings goals over time." This uncertainty is not hindering parents' motivation to save and ultimately reduce the potential student loan debt their children may face down the road. Eight-in-10 parents cite concern for their child taking on significant debt as a factor motivating them to save more. Just how much debt do they worry their kids will carry? Eighty-nine percent of parents expect their child to graduate with debt, estimating an average of $58,000 in student loans. Furthermore, many parents are looking to reduce the financial burden their children will face. In fact, many Massachusetts parents intend to bear the brunt of college expenses, planning to cover 53 percent of college costs with their own savings and parental loans. They also expect their child to take on approximately an average of 22 percent of the expenses and estimate another 18 percent will be covered by scholarships. For many parents nationwide, this commitment may be influenced by their own experience managing debt. Thirty-seven percent of parents with kids in high school report they are still paying down their own student loans; that percentage skyrockets to 68 percent for parents of kids in preschool or younger. To help do their part, more than half (52 percent) of Massachusetts parents saving for college are doing so in a tax-advantaged 529 plan. Nearly nine-in-ten (89 percent) believe that saving in a dedicated college account helps keep them on track as they work toward their college goals.
Opportunity to Build Greater Awareness of 529 College Savings Plan
Benefits
Of particular note in Massachusetts, 72 percent of parents were not aware of the new state tax deduction available to parents saving in a U.Fund College Investing account. Among these parents, 64 percent said they'd be likely to save more or college if they knew the state offered this benefit. "Many parents are still unaware that Massachusetts offers a new state tax deduction available to parents saving in U.Fund College Investing Plan, therefore missing out on a valuable college saving benefit," said Tom Graf Executive Director of MEFA. "Massachusetts parents have always shown a strong commitment to saving for higher education, and MEFA's goal is to help them take advantage of every opportunity to grow their savings and leverage 529 college savings plan benefits move them closer to achieving their goals." While there's a clear need to raise awareness of the new state tax deduction for college savings, many new families are now taking advantage. Fidelity's customer data shows a 64 percent increase in new U.Fund College Investing Plan accounts openings through the first half of 2017, compared to the same time last year.
Parents Need More Insight into How (Little) Saving Affects Financial
Aid In truth, only a small percentage of 529 plan assets (or savings in general), up to 5.6 percent, are included in a family's Expected Family Contribution (EFC), as determined by the federal financial aid formula. And yet, when asked how much of their total 529 savings they would be expected to contribute per year of college, 97 percent of Massachusetts parents either significantly overestimated or couldn't answer, illustrating a critical lack of knowledge of how 529 savings are considered in the financial aid evaluation process.
How to Close the Knowledge Gaps and Strengthen College Savings
MEFA and Fidelity offer complimentary college saving and financing guidance provided by dedicated representatives who are available to answer questions regarding savings options, including how to open a U.Fund College Investing Plan account. Parents can take advantage of college planning guidance at Fidelity's nine investor centers across Massachusetts, by calling 800-544-2776, or visiting www.fidelity.com/ufund. At www.mefa.org, MEFA provides free, expert guidance on planning, saving and paying for college, as well as links to career planning and financial aid resources. In addition, MEFA's community outreach includes more than 500 webinars and seminars annually led by financial aid specialists across Massachusetts. Fidelity's College Savings Learning Center provides a library of online resources for parents, including video courses on saving account options and strategies, additional calculators and other tools and resources on supplementary ways to pay for college, such as how to apply for financial aid and scholarships. Additional Viewpoints articles provide a range of insights on college topics including: Are your college savings on track?, The ABCs of 529 college savings plans and 3 "must know" college financial aid tips.
About the College Savings IQ Survey
About Fidelity Investments
About The Massachusetts Educational Financing
Authority (MEFA) The U.Fund College Investing Plan is offered by MEFA and managed by Fidelity Investments. If you or the designated beneficiary is not a Massachusetts resident, you may want to consider, before investing, whether your state or the designated beneficiary's home state offers its residents a plan with alternate state tax advantages or other benefits such as financial aid, scholarship funds and protection from creditors. Units of the Portfolios are municipal securities and may be subject to market volatility and fluctuation. This information is intended to be educational and is not tailored to the investment needs of any specific investor. Fidelity, Fidelity Investments and the Fidelity Investments & Pyramid Design logo are registered service marks of FMR LLC. MEFA, MEFA U.FUND MASSACHUSETTS 529 PLAN and U. FUND are registered service marks of the Massachusetts Educational Financing Authority. Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
820104.1.0 1 College Board, Trends in College Pricing 2016, October 2016. Estimates assume the cost of college is growing at 2.98% each year. A straight average of total charges (tuition, fees, room and board) for a combination of public and private four-year colleges was used for this calculation. Note that total expenses include books, supplies, transportation and other costs. 2 Fidelity Investments Grandparents and College Savings Study, June 2014 View source version on businesswire.com: http://www.businesswire.com/news/home/20171012005895/en/ |