confidential and proprietary information © 2015 sallie mae bank all rights reserved. conducted by...

Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.

Conducted by Ipsos Public Affairs

HOW AMERICA SAVES FOR COLLEGE 2015Sallie Mae’s National Study of Parents with Children under Age 18

DATE

Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.

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► Introduction and Study Background► College Value and Savings Sentiment► Savings Fluctuate► How Families Save for College► The Role of Planning► Parents Who Don’t Save► Conclusion

Agenda


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Study Objective ► To understand how American families are planning to pay for their

children’s higher education– Over time, track trends in parents’ behaviors and attitudes related to

planning for college costs—including how and how much they save—long before purchase and enrollment

Process► Fifth wave of the study since 2009► Quantitative online survey conducted January 2015

– 1,988 parents of children with at least one child under age 18 and who believe there is some likelihood their child(ren) will attend college

Background


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How America Saves for College 2015 Media Coverage: 1B impressions and counting

Research

“Middle-Class Families Shrink Their College Fund Contributions”

“College savings take a dive – study”

“Less than half of parents save for kids’ college education”

“Families saving less for college, investing poorly”

“How Parents Feel About Affording College: Pick a Synonym for Scared”

“Fewer Parents Are Saving for College”

“Report: College Savings Down 25% (Parents, We Mean You)”

“Parents Are Saving Less for College”

“Parents want this for their kids, but can't save enough”

“Most parents aren’t saving money for kids’ college education”

“Most parents aren’t saving money for kids’ college education”

“Report: US families saving less for college”

“Nearly half of American families are neither planning nor saving for one of the biggest expenses they'll face”

“Families saving less for college, investing poorly”

“4 Ways to Grow a College Savings Account Quickly”

Confidential and proprietary information © 2015 Sallie Mae Bank All rights reserved.

5

College Value and Saving Sentiment

Research


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► 89% of parents believe college is an investment in their child’s future.

► 93% of parents believe their child(ren) is likely to attend some form of higher education.

► Families saving for college are more likely to believe in the value of higher education than families not saving for college.

Parents believe in the value of college, and expect their child will attend


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More college savers agree with all values statements than non-college savers

Earn

mor

e m

oney

Amer

ican

drea

m

Stretch

finan

cially

Inve

stmen

t in fu

ture

Exper

ienc

e re

gard

less

of e

arni

ngs

Degre

e m

ore

impo

rtant

now

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

88% 90% 91%95%

77%

85%80%

76% 78%

84%

55%

71%

Agreement with Reasons for Attending College

College Savers Non-College Savers


8

59% of parents feel some trepidation about saving for college

• On average, 29% of parents feel overwhelmed, 29% feel worried, and 28% feel frustrated they won’t have enough saved to meet the cost of college

• Parents who are not saving are nearly twice as likely as college savers to express these sentiments


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Parents juggle feeling overwhelmed with feeling it’s the right thing to do

• On average, 25% of parents feel saving for college isthe right thing to do, and18% feel confident in theirability to save.

• Parents who have startedsaving for college are more than three times more likely than non-savers to expresspositive sentiments


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Savings Fluctuate

Research


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About half of families continue to save for college

Average value of savings earmarked for college remains around 10% of total savings

Proportion of parents savingfor college, year-over-year


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College savings are a priority

Saving for college ranks fourth in proportion of families saving, but second (behind retirement)in amount saved

Vacation

College

Retirement

General savings

Emergencies/Rainy Day

0% 10% 20% 30% 40% 50% 60% 70%

36%

48%

52%

54%

59%

Top 5 Goals for Which Families are Saving

Proportion of Families Saving


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Families with more time and higher earnings, have more college savings

Research

Total Low income Mid income High income $-

$5,000

$10,000

$15,000

$20,000

$25,000

$10,040

$2,574

$6,915

$22,652

2015 Average Amounts Saved for College, by Income

Age 0-6 Age 7-12 Age 13-17 Age 18+$0

$5,000

$10,000

$15,000

$20,000

$25,000

$6,010

$7,602

$14,790

$8,983

2015 Average Amounts Saved for Col-lege, by Age of Oldest Child

Age of Oldest Child


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How Parents are Saving for College

Research


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Most frequently used vehicle continues to be a general savings account

Vehicles Used to Save for College 201469% of savers use only one vehicle to save for college.

Some other way

General savings

529 plan

Checking account

Investments

Rewards program

CDs

US savings bonds

Prepaid state plan

Coverdell ESA/Ed IRA

Juvenile life insurance

Trust

UGMA/UTMA

0% 10% 20% 30% 40% 50%

16%

48%

27%

23%

17%

15%

15%

14%

12%

11%

11%

11%

9%

21%

45%

29%

24%

20%

18%

16%

15%

14%

13%

12%

11%

10%

Use of College Savings Vehicles, Year-over-Year

2014 2015

Proportion of Parents Using Each Vehicle


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Nearly one-third of the money saved for college in the U.S. is in 529 plans

Some other way

General savings

529 plan

Checking account

Investments

Rewards program

CDs

US savings bonds

Prepaid state plan

Coverdell ESA/ Ed IRA

Juvenile life insurance

Trust

UGMA/UTMA

$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

$395

$1,638

$3,089

$534

$1,580

$232

$1,053

$180

$407

$296

$244

$209

$183

Average Amount Saved, by Vehicle, among All 2015 College Savers


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Savings vehicle choices differ by income

General savings 529 plan Checking account Investments Rewards program CDs0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

29%

9%

15%

8%

6%5%

20%19%

5%

13%

3%

20%

13%

41%

5%

18%

2%

5%

Proportion of College Funds in Top Six Vehicles, by Income

Low-income Mid-income High-income


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Many “college” savers may not use their savings for college

General savings - local bank

General savings - online

US savings bonds

Trust CDs - online CDs - local bank Investments Checking account

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

57%49% 52% 51% 52% 50% 50% 46%

43%51% 48% 49% 48% 50% 50% 54%

Savings Intent

Savings Intended for College Savings Could Be Used for College if Needed


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Families are adopting behaviors to facilitate the process of saving

Keeping College Savings on Track, Year-over-Year


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Most parents say they are saving the same amount this year as they were last year


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Both goal- and process-oriented strategies can lead to saving success


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The Role of Planning

Research


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► Families with a plan to pay for all years of college enjoy these benefits:– They are able to spend more, thus take

advantage of more options

– Families are less likely to restrict school choice

– Students in these families are more likely to attend full time and pursue a BA

– Students in these families borrow less

– Parents are less worried about economic factors that could restrict their child’s future enrollment

The Importance of Planning-to-Pay for College


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57% of parents are either saving or have created a plan for how to pay for college


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Planners feel more confident and save more money than non-planners

• 30% saving parents with a plan use a 529 plan

• 20% of non-planning savers use a 529 plan

• 62% of parents with a planstarted saving before their child was 6 years old

• 51% of those without a plan started saving before their child was 6 years old

• 69% of planners feelconfident they can meet thefuture cost of college vs23% of non-planners

Planners Non-planners$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$11,102

$7,610

Average Amount Saved for College


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► Child opening his/her own savings account (31%)

► Research college costs (30%)

► Research financial aid (28%)

► Invest in a child’s skills to increase his/her chance of winning scholarships (28%)

► Discussed with other parents how they paid for college (21%)

► Limit college choice based on cost (17%)

Planning activities outside of saving


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Savers and non-college savers differ on funding future college costs

Expected Sources of Funds for Future College Costs


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► 41% of parents have discussed paying for college with their child

► 55% of parents of teens have discussed paying for college with their child

► Among those who haven’t, 31% will discuss when child is aged 16-18, 32% “aren’t sure” when; 6% of parents of teens don’t plan to discuss at all

Top 5 topics discussed with child:► Importance of earning

scholarships (55%)► Type of college able to choose

based on cost (41%)► Student loans (40%)► Work-study/employment while

in college (35%)► Importance of graduating on

time (32%)

Preparing the child for the reality of college costs

Research


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Families Not Saving for College

Research


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Top five reasons* why families aren’t saving for college

I don’t have enough money to save83%

I expect my child to

qualify for enough

scholarships or

financial aid

61%

I’m focusing on other saving

priorities50%

I haven’t

gotten around

to starting a

savings plan

yet51%

*combined major and minor reasons

I’m not sure

which are the

best options for

college saving

51%


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Parents not saving for college are more likely to:► Have HHI <$50k► Attained highest education level of high school ► Have child with split living arrangements between parents► Be ages 35-54

…while those saving for college are more likely to:► Be a millennial► Say child is “extremely likely” to attend college► Have HHI >$100k► Have a BA degree► Have child with own savings account► Have discussed paying for college with their child

Profile of a non-college-saving parent


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Parents of younger children are more likely to be planning to begin saving

Ages 0-6 Ages 7-12 Ages 13-170%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

22%

12%

30%

44%

36%9%

7%

10%19%

27%

42% 42%

Non-savers' Plan to Begin Saving for College, by Age of Child

Within one year Within five years Neither Not sure

66%

48%

39%


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► Families value higher education, but worry about cost

► College savings are down this year► Savings are concentrated—69% of families use

only one savings vehicle► College savers are adopting behaviors, such as

automated deposit, that make saving routine► Different types of savers define success

differently ► Planners save considerably more than savers

without a plan

Summary findings


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1. Open a savings account. Set up and designate a savings account as your college fund. Deposit gifts from friends and family, and sign up for free services that let you earn cash back to save for college.

2. Make regular contributions. Set a goal, and create a routine of adding money. Even a little bit adds up over time, and automatic deposits make saving easy.

3. Explore tax-advantaged options. Put your money to work using dedicated college savings programs like Coverdell Education Savings Accounts, prepaid state college savings plans, and 529 college savings plans.

Sallie Mae encourages families to save for college by following this 1-2-3 approach…


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SallieMae.com/HowAmericaSaves

Research


The information contained in this presentation is not

comprehensive, is subject to constant change, and

therefore should serve only as general, background

information for further investigation and study related

to the subject matter and the specific factual

circumstances being considered or evaluated. Nothing

in this presentation constitutes or is designed to

constitute legal advice.

(MKT10974)

confidential and proprietary information © 2015 sallie mae bank all rights reserved. conducted by...

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