(The author is a Reuters columnist. The opinions expressed are
By Liz Weston
LOS ANGELES, April 14 Parents who aren't saving
for college could learn a lesson or two from low-income parents
A Sallie Mae study released last week found that
half of parents with children under 18 haven't saved for
college. The top reasons for not saving: 58 percent said they
didn't have enough money to save for higher education and 22
percent said they expected their children to get enough
financial aid to pay for school. The results were gathered from
online interviews conducted by market research firm Ipsos Public
Affairs with 2,020 parents in November and December.
The parents who hadn't saved were less likely to have a
college degree (73 percent compared with 58 percent of savers)
and their kids were more likely to split living arrangements
between two separated parents (63 percent compared with 38
percent of savers) or live with a single parent (55 percent
compared with 45 percent for savers).
But stark contrasts also emerge when comparing low-income
parents who do manage to save with parents at all income levels
who don't, said Sarah Ducich, Sallie Mae's senior vice president
for public policy and the study's co-author.
"The difference is the value (low-income savers) place on a
college education," Ducich said. "They more strongly agree with
the statements that 'This is an investment in my child's future'
and 'I'm willing to stretch for this.'"
The study further found that 71 percent of low-income
college savers strongly agreed that college was an investment
and 66 percent strongly agreed that they were willing to stretch
financially to help pay for school. That compares with 51
percent and 39 percent of non-savers, respectively.
The findings echo research by economists Steven Venti of
Dartmouth College and David Wise of Harvard University, who
found the bulk of differences in how much households save for
retirement had to do with whether they chose to save, rather
than their incomes, individual circumstances or investment
choices. A significant portion of high-income households save
little, while a significant portion of low-income households
save a lot, they noted.
Lower-income college savers reported keeping their college
savings on track by committing to a monthly goal, cutting back
household expenses and reducing discretionary expenses, Ducich
HIGHER LIVING COSTS
Still, low-income savers' ability to save may be slipping.
They were less likely than middle- or higher-income savers to
say they put aside as much or more money than they did the year
before. The major reasons all families saving less cited were
higher living costs (55 percent), unexpected expenses (51
percent) and lower earnings (47 percent).
Lower incomes also correlated with lower savings, or not
saving at all. Two-thirds of low-income families say they hadn't
saved, compared with about half of middle-income and one-quarter
of higher-income families. The numbers are about the same as
they were before the recession.
"I'm always a little bit surprised that 34 percent (of
low-income parents) said they've saved money for college,"
Ducich said, noting that it's not easy to live on less than
$35,000 in the United States.
Even those with higher incomes were likely to say they
didn't have enough money to save for college, however.
Sixty-nine percent of parents with incomes over $100,000 cited
lack of money as either a major or minor reason they weren't
saving, compared with 79 percent of middle-income families and
80 percent of low-income families.
Lower-income parents were somewhat more likely than
higher-income ones to say they weren't saving because they
expected financial aid to cover the costs. Sixty-four percent of
those making less than $35,000 cited it as a major or minor
reason for not saving, compared with 60 percent of middle-income
parents and 58 percent of high-income parents.
In reality, even families in the bottom 25 percent of
incomes often face significant college costs, according to
figures from the National Postsecondary Student Aid Study. Grant
aid typically offsets tuition and fees for the poorest families
but doesn't cover other costs such as room and board or
supplies, leaving the lowest-income families with an average net
cost of attendance of nearly $12,000 a year in 2011-12 for a
four-year, in-state public college.
Net costs were nearly $16,000 for families in the second
lowest income bracket.
Interestingly, higher-income parents were far more likely
than middle-income or lower-income parents to say they weren't
saving because education was the child's responsibility.
Twenty-one percent of parents with incomes over $100,000 cited
that as the major reason they hadn't put money aside, compared
with 13 percent of middle-income parents and 5 percent of
"Predominantly, it's considered a shared responsibility of
parent and child," Ducich said.
(Follow us @ReutersMoney or here;
Editing by Beth Pinsker, Lauren Young and Jonathan Oatis)