‘College Savings Drop Off as More Parents Feel Pinched’

by Grace

Wonder how much parents have been contributing recently to their kids’ college-savings plans in this fitful economy? Short answer: Not much.

Just ask Michael Heenan, a Sacramento-based communications consultant.

When the economy was growing in 2006 and 2007, he and his wife were contributing a stellar $24,000 a year to the 529 college savings plan for their daughter, who is now 11.

“We wanted to be able to say, ‘Honey, if you want to go to Harvard or MIT, you go!’ We were a couple of years away from being able to take a huge financial concern off the table.”

But his income dipped along with the recession, and paired with the tanking stock market, it “brought annual contributions to a halt,” said the 48-year-old. “One time I opened a statement, looked at the number, and thought, ‘Well, to hell with that’.”

Many of us are in similar circumstances.

Heenan’s not alone in shying away from college savings, as a result of being spooked by a wildly gyrating stock market and rising tuition bills.

New figures for the nation’s 529 plans are in from Boston-based Financial Research Corp., and there was a $354 million outflow in the third quarter. The last time parents pulled cash out of college-savings plans, rather than putting in: The fall of 2008, when the financial crisis was at its height.

The middle class, who should be doing most of the saving, is feeling more pressured than ever. People are saying, ‘What are we going to do?”‘

That might be why parents are now coming up with only 37 percent of the total college bill, compared to 47 percent last year alone, according to the Sallie Mae study “How America Pays for College.”

If money is tight, parents are doing the right thing.

After all, college savings should not be the foremost priority of cash-strapped parents; retirement, emergency funds and insurance should all take precedence. He makes the analogy of airplane travel with kids: “You need to put on your own oxygen mask first.”

Here’s some some advice for parents of high schoolers facing the high cost of college.

%d bloggers like this: