According to new research from Massachusetts Educational Financing Authority (MEFA) and Fidelity Investments®, 60 percent of Massachusetts grandparents are saving or plan to start saving to help pay for college costs, and a full 88 percent report they would be likely, if asked, to make a contribution to their grandchild’s college savings fund for special occasions in place of other gifts. Of grandparents already saving or planning to save, many expect to make significant contributions. When asked how much they anticipate contributing to college education funds of all their grandchildren, they report a median of $50,000, with more than half (51 percent) expecting to contribute even more.
The 2014 Grandparents and College Savings Study findsthat a majority of grandparents in the Commonwealth are taking part in planning for their grandchildren’s college career. In fact, more than three quarters (77 percent) of grandparents think it’s important to help grandchildren pay for their college education. Among those who talk to their adult children about a grandchild’s college education, 62 percent give advice about saving for college at least once a year.
Why this feeling of responsibility? The study indicates grandparents value a college education and believe it is an important component to providing young people with the best opportunity to succeed. They also recognize that as the cost of college continues to rise, parents and grandchildren face a big challenge in saving enough to cover costs, and that without help their grandchildren could face a significant financial burden after they graduate. In fact, more than a third (35 percent) of Massachusetts grandparents worry about their grandchildren’s ability to attend college without incurring significant student loan debt.
Find out what's happening in Melrosefor free with the latest updates from Patch.
"Grandparent have a strong desire to help with the cost of college because they know the significant benefits for both their children and their grandchildren," said Thomas Graf, executive director of MEFA.
"Instead of giving toys for birthdays and holidays- gifts that will be broken and long forgotten-, many Grandparents see the wisdom of putting money aside for a gift that will last a lifetime- a college education.”
Find out what's happening in Melrosefor free with the latest updates from Patch.
Older Generation Well-Schooled--and Engaged--in Today’s College Realities
According to the study, 56 percent of Massachusetts grandparents are familiar with 529 college savings plans. Grandparents like the fact that 529 plans are dedicated solely to college savings, that earnings can be withdrawn federal income tax-free for qualified education expenses and that funds can be controlled until the time is right to share them with their children, grandchildren or college of choice.
Fidelity’s business data shows a growing interest in 529 college savings plans by grandparents. The firm has seen a 12 percent increase in the number of new Fidelity-managed U.Fund College Investing Plan accounts opened by grandparents during the first four months of 2014 (January through April), compared to the same period last year.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planningat Fidelity. “Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
Additional findings:
· Grandparents often join the planning conversation: In many families, grandparents are taking part in college planning conversations. Seventy-four percent of grandparents acknowledge talking to their children about college issues, including the total cost of college and how the family will pay for it. Nearly half of grandparents (48 percent) talk directly with their grandchildren as well.
· Financial Help to Continue on Campus: For some, financial commitment will continue even once their grandchild is enrolled in college, with 62 percent of grandparents from the Commonwealth planning to help pay expenses by providing funds to the grandchild, their parents, or directly to the college institution of choice.
· Investing in the future: Forty-eight percent of grandparents are including or thinking about including college savings for their grandchildren in their long-term financial or estate plans.
Resources Available to Help Grandparents Ace College Gifting 101
When the time comes to start using college savings to pay for expenses, grandparents need to understand that in some cases their contributions may impact applications for financial aid, depending on when they are used. MEFA and Fidelity offer complimentary guidance to help families understand their college saving and financing options, and develop a plan to best leverage savings to help pay college expenses.
Fidelity’s Viewpoints article “Giving your grandkids a head start” provides additional information for grandparents about different college savings options available, as well as the benefits and considerations to be taken into account based on a family’s individual situation. More information, including how to open a U.Fund 529 college saving account, can be found atFidelity.com/ufund, or by calling 1-800-544-2776 to speak directly with a college savings specialist.
