Families, including those using financial advisors, aren't making any headway in their plans to cover college costs, according to Investment’s College Savings Indicator. But the families using advisors are still better positioned than those who don’t, the survey says.
The percentage of college costs that families are projected to cover is just 16 percent, according to the survey conducted in June and July. That’s flat from 2010, and down from 24 percent in 2007.
Among families that use advisors, 31 percent of college costs are projected to be covered, up from 28 percent last year but down sharply from 47 percent in 2007. Fidelity’s report doesn’t give a reason for the difference in results between advised and non-advised families. The advice may be paying off, or it could be that families that use advisors are more affluent than those who don’t.
Part of the problem is the sharp increase in college costs—up 26 percent over five years. One trend that’s clear: More families are turning to advisors for help in planning for college. Fidelity says 33 percent are doing so now, compared to 21 percent five years ago. Most parents—62 percent—say they’re closer to achieving their college savings goals with an advisor than without. Sixty-one percent of parents who work with advisors are saving systematically for college bills, compared to 51 percent who are saving systematically but not working with advisors.
For a closer look at how advisors are faring with 529 college savings plans, click here.
The survey, performed online by Research Data Technology, polled 2,400 families with children age 18 and younger. Annual household income was at least $30,000, with average household income totaling $82,500.
Parents are saving earlier for college, Fidelity reports. Forty percent of those with preschool-age kids have started socking money away in dedicated accounts, up from 27 percent in 2007. Some of those parents are putting a portion of the preschool or daycare money into those funds when they don’t need to pay those bills any more, the report says.
One thing that can ease parents’ minds about covering those costs: College savings are unlikely to affect financial aid, according to college consultant Lynn O'Shaughnessy, who writes for Registered Rep. on the topic. She says that less than 4 percent of families have put enough money away to affect a financial aid award. The formulas that calculate financial need don’t take qualified retirement savings into account, she adds, and may not include home equity either. Even wealthy students may qualify for merit awards, O’Shaughnessy adds, although not always.
Here’s a rundown by Fidelity on what advisors are helping their clients with:
|Activities for Which Advisors Currently Help||2011||2010|
|The financial aid process||25%||37%|
|Strategies for efficient college savings||45%||41%|
|Strategies for efficient withdrawals of college savings||33%||35%|
|The grant process||22%||30%|
|Determining the share of college costs you and your child should bear||27%||32%|
|benefits of 529 plans||37%||41%|
|None of the above||38%||38%|