Most parents plan to cover half of kids’ college costs, even as personal debt increases

Nearly all American parents saving for their children’s college education — 95% of them, in fact — expect to cover more than half of the cost for their kids. While about 1 in 3 (36%) say they will pay for the full cost, 2 in 3 (64%) expect their child to pay something.

These are among the findings from Northwestern Mutual’s “Planning & Progress Study 2024,” which explores debt and college savings trends. The report also indicated that 37% of parents saving for their kids’ educational expenses anticipate the child’s contribution to be between 1% and 25%. More than 20% anticipate the contribution to fall between 25% and 50%.

“For many parents, saving for their kids’ college expenses is priority number one,” Christian Mitchell, chief customer officer at Northwestern Mutual, said in a statement. “Each family should determine what feels right for them — but they need to act intentionally. Otherwise, the window to save for college costs may close — and fate will dictate how much parents and kids must contribute. It’s also important to remember that college loans exist, but there is no such thing as a retirement loan. If parents can’t afford life in retirement, that unexpected financial burden may fall on their kids’ shoulders. That’s why it’s so important to consider every money move as part of a larger financial plan. With a comprehensive plan in place, parents can help their children pursue higher education without worrying about sacrificing their own future goals.”

Other key findings from the report:

• Americans saving for college think it will cost more than $77,000, a debt they don’t expect to pay off until age 45.
• More than 2 in 10 Americans who are saving for higher education for a loved one are simultaneously paying off their own college loans.
• Six in 10 Americans say they have an emergency fund — cash or other liquid assets independent of money earmarked for specific goals, such as an IRA or 401(k) plan — and the average amount they have saved is $25,500. Only half (53%) say their savings would be enough to cover more than six months of expenses.
• The average American’s personal no-mortgage debt is nearly $23,000; the primary source of debt is credit cards, which account for more than double the No. 2 source (car loans) and more than triple the No. 3 source (education).
• Millennials and members of Generation X carry the most debt; in both age groups, more than 4 in 10 say their personal debt is at or near its highest level ever. Meanwhile, only 6 in 10 millennials and Gen X’ers say they have a specific plan in place to pay down their debts.

Related: Biden forgives $6.1B in student debt for ‘defrauded’ borrowers of for-profit school

“Inflation and higher interest rates are creating a double dilemma for consumers. Prices and the cost to borrow are both up, and that one-two punch is leaving a mark on Americans’ debt levels,” Mitchell said. “As an example, the average cost for a new car in America is $10,000 more than just five years ago, and many credit card interest rates exceed 20%. Splurging can feel amazing — or it can fuel more financial anxiety, if it’s not planned for. The sooner people build a comprehensive financial plan that addresses their debts, the faster they can go on offense and start pursuing their dreams, guilt-free.”

Data for the ”Planning & Progress Study 2024” was gathered in January by The Harris Poll on behalf of Northwestern Mutual from among 4,588 U.S. adults.