Parent Involvment in College Expenses
Importance of College Increases for Parents; Three Out of Four U.S. Families Worry About Ability to Cover College Costs
RIVERWOODS, Ill.--(BUSINESS WIRE)--August 15, 2013--
The number of parents with college-bound teens who see value in a college education has increased from a year ago, according to a yearly survey commissioned by Discover Student Loans. The independent poll found that 87 percent of parents say college is "very important" to their children's futures, up from 81 percent in 2012. Those parents who say a college education is only "somewhat important" dropped from 14 percent to 11 percent over last year.
Eighty-one percent of parents plan to help pay for their children's college education, an increase from 74 percent a year ago. But a willingness to pay doesn't correspond to an ability to pay. Seventy-nine percent of families are very or somewhat worried about having enough money to contribute, compared to 75 percent last year.
"We're encouraged that parents continue to see the life-long benefits of a college education," said PK Parekh, vice president for Discover Student Loans. "But it can be overwhelming to figure out how to pay for college. Discover encourages parents and students to plan early and maximize grants, scholarships and other free financial aid. If free money and family savings aren't enough, then families should compare federal and private student loans to see which kinds of loans are best to cover the gap."
Understanding Federal vs. Private Student Loans
Twenty-nine percent of parents said that most of the money to pay for college will come from student loans, followed by 27 percent mostly from family savings and 11 percent mostly from 529 savings plans, all of which are largely unchanged from last year.
Half of parents said their children plan to use student loans, with 54 percent planning to use a combination of both federal and private student loans, 32 percent just using federal, 4 percent just using private, and 10 percent not sure.
When it comes to student loans, understanding the differences between federal and private student loans can help families determine what suits them best. While 68 percent of parents said they were very or somewhat knowledgeable about the differences, and 30 percent were either not very, or not at all knowledgeable.
"Interest rates, origination fees, and repayment options are some of the things to consider when choosing between federal and private student loans," said Parekh. "Families also should consider the entire cost of a college education, beyond just the first year of school, so they fully understand the financial responsibilities they are taking on. Being aware of all the costs involved will help families better prepare and anticipate monthly payments."
Student Loan Debt and Repayment
Parents are still likely to help their children pay back any loans they may use for college, with 58 percent saying they are very or somewhat likely to help pay, up slightly from 55 percent in 2012.
Forty percent of parents think their children fully understand the amount of debt they will graduate with after college, while 32 percent think they children will somewhat understand and 15 percent don't think their children understand at all.
Finding Trusted Information
Parents continue to trust college financial aid offices for reliable information on paying for college. The year-over-year numbers were unchanged showing 47 percent of parents consider college financial aid offices the most trusted places for information, while 13 percent said personal financial advisors and 8 percent said friends and family.
The national survey of 1,000 adults with college-bound children 16 to 18 years old was commissioned by Discover Student Loans and conducted by Rasmussen Reports, an independent survey research firm (http://www.rasmussenreports.com), July 29 to 31, 2013. The margin of sampling error was +/-3 percentage points with a 95 percent level of confidence.
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America's cash rewards pioneer, and offers home loans, private student loans, personal loans, home equity loans, checking and savings accounts, certificates of deposit and money market accounts through its direct banking business. It operates the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discover.com/company.
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*pie chart did not have information from 2012