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Financial Planning > College Planning > Saving for College

Easing the Pain

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As college tuition costs continue to rise, more and more grandparents are helping to foot the bill, according to a recent AIG SunAmerica Mutual Funds survey. Of 1,000 grandparents questioned, 54% were, or planned on, contributing to their grandchildren’s college education. Twenty-five percent of those surveyed said they expected to pay between 25% and 50% of the costs, while another 20% planned to finance as much as 75%.

College tuition costs are expected to increase about 8% per year–which means college costs double every nine years, according to tuition guide FinAid Page, LLC ( And many parents are simply finding they do not have the financial resources necessary to underwrite their children’s choice of schools.

Grandparents are more involved with their grandchildren financially and socially than in previous generations, says Betsy Treitler, VP of marketing communications for AIG. “They are very much involved in funding their grandchildren’s education in a number of different ways,” she says, especially since this group is mostly retired and probably “wasn’t as affected” by the bear market and unemployment as their children. Despite their good intentions, however, most grandparents are not familiar with 529 plans and therefore are not using the most effective savings strategies, she continues. According to the survey, 89% of grandparents aren’t invested in 529 plans, and 9% were not even aware of 529 plans.

On a positive note, the survey did reveal that grandparents understand the value of getting startd early on a college savings plan, with 70% of respondents suggesting such plans should be started before the child reaches age four.


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