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Parents face tuition crunch
New study shows savings not enough to cover one year of college. Parents expect kids to help.
October 7, 2003: 5:54 PM EDT

NEW YORK (CNN/Money) - Parents saving for their children's college education have been doing so for about six years and have accrued a median of $10,000, meaning 50 percent of parents have saved less.

By the time their oldest or only child attends college, they expect to have a median of $35,000 in college savings.

Those are just two of the findings from a new study released Tuesday by the Investment Company Institute, a mutual fund trade group. The survey, conducted this past spring, was based on interviews with 918 households with children under 18.

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That families expect to have $35,000 in college savings by the time their first tuition bill rolls around means they may not have enough to foot more than a year or two of college for one child, if that.

The total cost to attend one year at a private four-year college last year was $27,677, according to the College Board. The price tag at a four-year public college was $12,841.

Given that college prices have been rising annually at a rate that has far outpaced inflation, those bills will be much bigger when today's 10-year-old hits the quad.

That may be why respondents to the ICI survey indicated that they are not expecting to foot the entire bill themselves. Thirty-four percent of respondents said they expected to receive help paying for college from adult relatives such as grandparents or a former spouse, while 62 percent said they expected the college-bound child to contribute.

Of households with college savings, only 8 percent said they had opened a state-sponsored 529 college savings plan and 7 percent had at least one 529 prepaid tuition plan.

The median amount held in either a 529 prepaid tuition plan or a 529 college savings plan was $5,000. The median amount saved in a Coverdell Education Savings Account (formerly known as an Education IRA) was $4,000.

Nearly a third of respondents said they were not saving for college. Of those, 48 percent said their top reason for not doing so was that they could not afford to at this time. Seventeen percent said they thought it was the child's responsibility to pay for college. And 15 percent said their child is too young.

Who's saving?

The households that reported saving for college had a median income of $78,000 and median financial assets of $87,500. They were typically headed by a parent with a median age of 42 who has a job, a college or postgraduate degree and is married or living with a partner.

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The households that are not currently saving for college had a median income of $60,000 and median financial assets of $50,000. They also typically were headed by a parent in their early forties who was married or living with a partner and had a job, but fewer of these parents had a college or postgraduate degree.  Top of page

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