BOSTON--(BUSINESS WIRE)--Fidelity Investments’® and MEFA® (Massachusetts Educational Financing Authority) 2020 College Savings Indicator Study finds American families continuing to grapple with how to pay for the rising cost of higher education. The study reveals 82% of Massachusetts parents are concerned about COVID-19’s impact on their ability to save for college and nearly one-quarter (23%) are not even sure what college will cost by the time their children enroll. Even with these hurdles, only 10% of parents plan to decrease contributions to their children’s college savings this year.
Despite the pandemic, the study finds a record high 84% of Massachusetts parents are already putting money away for college. This is substantially higher than the 70% who had started saving in 2018. However, parents still fall short on funding their college savings goals; while Massachusetts parents hope to pay for 68% of their children’s college education, they are only on track to cover 46% of that goal (up from 37% in 2018).
"More Massachusetts parents are saving for college than ever before, and in the midst of a pandemic, MEFA is here for families seeking answers with our expert information, guidance, and one-on-one college planning appointments,” said Tom Graf, Executive Director of MEFA. “MEFA has expanded its customer engagement to meet the needs of parents who value a college education for their children."
As the Pandemic Reshapes Education, Families Say They Still Believe College Is Worth the Cost
With families across the Commonwealth coping with disruptions to education, less than one-in-five (19%) say their children are confident heading into Fall 2020, and 25% say their children are “anxious” or “uncertain.” Two-thirds of parents believe that in-person instruction is best for their child’s learning, indicating that the pandemic’s shift to virtual or hybrid models is a concern for many families. If distance learning becomes more common down the road, 42% of parents say they will have their child attend a less expensive college since they would not want to pay full tuition for virtual classes.
Despite the shifting landscape of higher education resulting from the pandemic, the study conducted from June 5 to July 2 found nearly three-quarters (74%) of Massachusetts parents agree college is worth its cost, and 75% of parents believe their children feel this way as well. Nearly half (46%) of parents say a shift to distance learning won’t impact college decisions in the long-term.
529 Plans Help Massachusetts Families Prepare for College, Improving Savings Outlook
The study reveals setting aside money in a dedicated 529 savings account is correlated with better outcomes for college savings; in fact, 529 owners in Massachusetts are on track to cover 55% of their college savings goals, while those without a 529 are only on track to meet 42% of their goals. Encouragingly, nearly half (49%) of Massachusetts parents surveyed have opened a 529 college savings account, a record high. To help families get started saving early, the Massachusetts State Treasurer’s Office in January launched the BabySteps Savings Plan, the first statewide seeded college savings account program. With the launch of BabySteps, every child born or adopted on or after January 1, 2020 who is a Massachusetts resident will be eligible to receive a $50 seed deposit into a U.Fund 529 College Investing Plan account.
“Without the right tools in place, parents can fall short of their college savings goals,” said Melissa Ridolfi, vice president of Retirement and College Leadership at Fidelity Investments. “A 529 college savings account can help parents dedicate dollars to the specific goal of funding their children’s education. Particularly in light of the financial stress facing families today, it is important for parents to know that these plans have become more flexible as it relates to what is included in the definition of qualified distributions; recent legislation expanded the definition of a qualified distribution to include certain apprenticeship costs, K-12 education, and student loan repayment up to $10,000.”
Additional Findings and Resources for Massachusetts College Savers:
- Among the 10% of Massachusetts parents planning to decrease contributions to college savings this year, COVID-19 concerns, unemployment, and market volatility were top drivers of the change. Learn more on how parents are approaching college savings during the pandemic.
- The vast majority (83%) of parents identify concerns about student loan debt as a motivating factor in saving for their children’s college education. To help families estimate and understand the student loan process, Fidelity offers this free Student Debt Tool: Fidelity.com/studentdebt. And, MEFA provides step-by-step guidance1 on preparing for college costs at every age.
- Parents expect their children to have saved a median of $5,000 by the time they graduate high school. Even so, 47% of parents have not yet talked to their children about saving and paying for college. This three-minute video can help parents know how to start the conversation.
- And it’s important to circle back to the significant impact that saving for college can have on a child’s future. This 90-second video1 will help families understand why they should start saving for college, if they haven’t already.
The full study results are available here.
About the Fidelity Investments 2020 College Savings Indicator Study
Fidelity Investments conducts a College Savings Indicator Study every other year. As part of the study, Fidelity conducted a survey of parents with college-bound children of all ages. Parents provided data on their current and projected household asset levels including college savings, use of an investment advisor, and general expectations and attitudes toward financing their children's college education. Using Fidelity's proprietary asset-liability modeling engine, the company was able to calculate future college savings levels per household against anticipated college costs. The results provided insight into the financial challenges parents face in saving for college. Data for the Indicator (number of children in household, time to matriculation, school type, current savings, and expected future contributions) was collected by Boston Research Technologies, an independent research firm, through an online survey from June 5 to July 2, 2020 of 1,790 families nationwide with children aged 18 and younger who are expected to attend college. The survey respondents had household incomes of at least $30,000 a year and were the financial decision makers in their household. College costs were sourced from the College Board's Trends in College Pricing 2019. Future assets per household were computed by Fidelity Personal and Workplace Advisors LLC (FPWA), a registered investment adviser and a Fidelity Investments company. Within Fidelity’s asset-liability model, Monte Carlo simulations were used to estimate future assets at a 75 percent confidence level. The results of the College Savings Indicator may not be representative of all parents and students meeting the same criteria as those surveyed for the study.
About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $9.0 trillion, including discretionary assets of $3.5 trillion as of August 31, 2020, we focus on meeting the unique needs of a diverse set of customers: helping more than 32 million people invest their own life savings, 22,000 businesses manage employee benefit programs, as well as providing more than 13,500 institutions with investment and technology solutions to invest their own clients’ money. Privately held for more than 70 years, Fidelity employs more than 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about-fidelity/our-company.
About MEFA® (Massachusetts Educational Financing Authority)
MEFA is a not-for-profit state authority, not reliant on state or federal appropriations, established under Massachusetts General Laws, Chapter 15C. MEFA’s mission, since its founding in 1982, has been to help Massachusetts students and families access and afford higher education and reach financial goals through education programs, tax-advantaged savings plans, low-cost loans, and expert guidance. All of MEFA’s work aligns with the ever-present goal to support the independence, growth, and success of Massachusetts students and families. Visit mefa.org to learn more or follow MEFA on Twitter @mefatweets and on Facebook at mefaMA.
Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.
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