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Financial Planning > College Planning

Sticker Shock: 71% of Parents Say College Is Too Costly

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College is well worth it but many can’t afford it. That’s the main message from HSBC’s latest Value of Education survey released Wednesday.

Seventy-one percent of U.S. parents believe a university education is unaffordable for the majority of Americans but 60% believe it’s essential for their child’s long-term success, according to the survey.

“College is absolutely necessary but at the same time unaffordable,” says Brian Schwartz, a financial advisor at HSBC.

The average cost for one year of tuition, fees and room and board for the 2014-2015 academic year is $19,000 at a public four-year college for in-state residents and $33,000 for out-of-state students, according to the College Board. The cost for a private four-year college is $42,400.

One result of the disconnect between what parents desire for their kids and what they can afford is an increasing number of parents scrutinizing the graduate employment rates of colleges, according to the survey. Seventy-four percent of respondents say they consider an institution’s graduate employment rate when helping their child choose among different schools, after considering the quality of teaching (90%) and tuition fees (81%).

An almost equal percentage – 78% – have a specific profession in mind, most likely to help boost their child’s employment rate after college. The survey found that parents’ top career preferences are engineering (14%), medicine (13%) and computer science (10%).

As for financing a college education, the survey found that 55% of parents with a child under five expect to use an education savings plan but only 31% with a child in college had such plans.

Schwartz says these relatively low numbers are likely due to a lack of money and a lack of discipline to save among parents.

“Everyone has the best intensions,” says Schwartz. “It’s the implementation of that process that’s usually absent… There has to be a plan in place to see that through.”

The survey found that 90% of parents who expect their child will attend college are willing to contribute to the costs and 65% expect their kids will contribute as well. Loans are expected to play a big part and almost one-third expect grandparents will share the financial burden.

Fifty-nine percent of parents expect their child will need to take on debt to finance college while 34% anticipate borrowing money themselves. Parents expect it will take them almost nine years for to repay those loans and their kids almost 10 years.

A recent report from the LIMRA Secure Retirement Institute found that student loan debt among retirees has been increasing at a rapid rate and accounted for 15% of their non-mortgage debt as of 2013 compared to less than 1% in 1989, according to the latest data.

In related news this week, 116 civil rights, housing, labor, consumer and other groups responded to a Consumer Financial Protection Bureau’s request for information on student loan servicing issues, pushing for stronger measures to protect borrowers’ rights and help with repayment. The CFPB, along with the U.S. Treasury and Department of Education, is considering more consumer protections to improve student loan servicing.

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