Q&A with Richard Polimeni
$1.4 TRILLION.That’s the amount of debt that has engulfed families of children attending college. If you ask Richard J. Polimeni, the number is daunting and unrealistic. As the chair of the College Savings Foundation and director of the Education Savings Programs Bank of America Merrill Lynch, Polimeni has a firsthand look at what it takes to make the dream of a college education a reality.
The College Savings Foundation is a leading national nonprofit designed to help American families achieve their education savings goals. It works with public policy makers, media representatives and financial services industry executives in support of education savings programs.
What are they seeing out there today? According to one recent report on college funding by education-financing company Sallie Mae, today’s parents and students are relying less on their own income and savings, while depending more on scholarships and grants.
At first glance, when compared to how challenging it is for people to save for retirement today, the idea of saving for a college education amid continuing rising costs can indeed be daunting. In turn, the challenge has fallen on higher education marketers to further prove that the college option is one every student should take today.
Relevate sat down with Polimeni to get his thoughts on what higher ed marketers should know when it comes to the dynamics of saving for college today.
Q How much do most families typically save for college?
A For 11 years, we have surveyed parents across the country in our CSF State of College Savings survey about their attitudes and behaviors around funding their children’s higher education. We’ve also conducted surveys of high school students to learn more about their plans for funding college and how that is affecting their choices for post-secondary paths. Both annual surveys of parents and their kids show that savings is their No. 1 way to pay for college.
In the “2017 CSF State of College Savings” survey, we found that parents, especially from their young 20s to mid-40s, are purposefully and regularly saving for their children’s college education: 83 percent are saving – an all-time high in the survey’s history. And they are saving substantially: More than half – 51 percent – of savers had already saved more than $10,000 per child and 71 percent of savers had already saved more than $5,000 per child. Thirty-eight percent of all respondents had saved more than last year.
Another finding from this survey shows that many parents – 38 percent - are using 529 college savings plans to reach their goals.
Q What are the dynamics surrounding saving for college today?
A The biggest source of pressure on families is the cost of college, which continues to rise. And as a result, we have the second major dynamic affecting families and that is the ground-swell of student debt – now over $1.4 trillion in this country.
This is a source of concern for young parents today and is actually motivating them to save for their children’s future college expenses, even though nearly half of them are still carrying student debt themselves, according to our “2017 State of College Savings Survey.” They have developed disciplined saving habits, with more than half – 57 percent – starting when their child was born and 75 percent saving systematically.
It may sound simple, but when parents start saving early and often, they can get ahead of the curve on debt. For example, if you put away $100 a month for 18 years, you will have $35,000 in savings, including interest. If you borrow $35,000, you will be paying back $435 a month for 10 years for a total $52,000.
Q What trends are impacting these decisions today?
A High school students are worried about student debt, and seem to view their college choices with costs and long-term career value in mind. Our eighth annual “2017 How Youth Plan to Fund College” survey of sophomores, juniors and seniors across the country found that these Gen Zs were a pragmatic group when planning and paying for their higher education. They plan to rely less on external funding such as loans and scholarships and instead use their own savings and expect to work while in college.
Seventy-nine percent said that costs have been a factor in determining which college to attend, and 69 percent said that their career plans would affect their school choice. At the same time, they’re stepping up to the prospect of paying for college, with 35 percent saying they’d pay for part or all of their costs. Half said they’d possibly contribute and 60 percent of all surveyed are already saving.
Nearly 50 percent of all students had already saved between $1,000-$5,000, and 27 percent had saved more than $5,000. How are they doing it? A commitment to working: 54 percent have already landed jobs to earn money for higher education; and 85 percent said they’d work during college – with 20 percent planning to work full-time.
Additionally, they are considering strategies to reduce college costs, including attending community college for two years and then transferring to a four-year college (29 percent), living at home (22 percent), and attending a state school (15 percent).
Meanwhile, parents are looking for ways to reduce college costs. Our “2017 State of College Savings” survey found that 71 percent expect their children to help pay for college, while 29 percent consider a key strategy to be having their children attend community college for two years and transfer to a four-year school. This correlated with the “2017 How Youth Plans to Fund College” survey findings that 25 percent of high school students were choosing community college as an option, and 6 percent were opting for vocational or career school.