All parents want to send their kids to college. Unfortunately, more and more parents are finding it difficult to save for college in these days of rising tuition rates and a shaky economy.
A generation ago parents put their child’s college funding at the top of the priority list, but now many parents are being forced to postpone their plans or forego saving for college altogether. A number of factors are contributing to this shift, including unemployment, higher tuition rates and the urgent need to save for retirement.
Unemployment and Lower Wages
The national unemployment rate currently stands at 9.2 percent, according to the U.S. Bureau of Labor Statistics. The actual number may be much higher, as many people do not qualify for unemployment and others have exhausted their benefits. This number also does not take into account the vast number of formerly full-time workers who are being forced to work part-time. If these were the only problems, the situation would be bad enough, but unfortunately a lot of consumers have also had to take pay cuts to retain their jobs or find another position.
All of this puts a crimp in consumer spending and especially in saving. No one is going to be saving for college when they are depending on unemployment benefits to pay the mortgage!
Higher Tuition Rates
It is just a fact that college tuition is increasing much faster than inflation. The college financial aid website Finaid.org reports that the average increase in tuition is now eight percent a year. This means that the cost of a college degree doubles every nine years!
This massive increase has made many parents stop trying to save for college because they feel they will not be able to afford it anyway. After all, if a child born tomorrow will have to pay four times the current tuition rate, he or she will probably have to depend on another source of college funding anyway.
Parents are feeling the pinch from another location as well, as it is becoming ever more expensive to retire. There was a time when one million dollars was considered a good goal to strive for, but now advisors are warning people that they may need to save two or three times that if they want to have a comfortable retirement.
Everyone wants to retire, and no one wants to live on Social Security benefits that may be well under $1000 a month. The net result is that many parents are putting money into their 401(k)s instead of saving for college.