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Survey: Parents, kids need to communicate better on college costs

We absolutely advocate being upfront with your kids about (paying for college),” says senior T. Rowe Price adviser Roger Young. (Submitted Photo)

“We absolutely advocate being upfront with your kids about (paying for college),” says  T. Rowe Price senior financial planner Roger Young. (Submitted Photo)

Communication between parents and children about the costs of college and how to pay for college could be much better, a survey by Baltimore-based money manager T. Rowe Price Group Inc. found.

The survey found a gap between parents and children over expectations of who would pay for college and how college would be paid for. It also found that parents sacrifice some of their own long-term security to help pay for school costs. 

“With the survey, we regularly see that it is tough for parents to talk to their kids about finances,” said Roger Young, a senior financial planner at T. Rowe who is involved with the survey. 

T. Rowe’s annual Parents, Kids & Money Survey polled 1,005 parents and 1,005 kids ages 8-14 with a margin of error of +/- 3.1 percentage points.

The underlying cause of any discrepancy between parents’ expectations and kids’ expectations of how college will be paid for is parents’ discomfort bringing up the topic.

Thirty-six percent of parents said they were very or extremely uncomfortable discussing saving for college. The only topics they felt less comfortable discussing with their kids were school safety (38%), sex (38%) and drugs (37%).

This discomfort has led to differences about who should be paying for college. Most parents say they can cover some of the costs of college, but only 37% of parents believe they can cover most or all college costs.

At the same time, 69% of kids expect their parents to pay for college.

Still, most parents believe they or their children could take on significant amounts of debt in order to pay for college. More than half of parents said they would take on at least $25,000 in debt to pay for their kids’ college, while 46% said they would let their kids take on that much debt.

But attitudes about less expensive schools are also changing to the point that 78% of parents said that they would send their kids’ to a less expensive school to avoid student loans.

That number was up from 62% in 2017. Young called the trend encouraging.

More parents appear to be utilizing tools like 529 college savings accounts to help pay for college. The survey found that 44%of parents use the accounts, which have been the most popular tool to save for college the last two years.

The previous two years of the survey, the most popular tool had been a regular savings account.

The T. Rowe survey comes out the same week as a report from Student Loan Hero, a Lending Tree publication, that says two of the cities with the highest amount of student debt are in the Maryland area. 

Washington has the highest median student loan debt balance in the country at $29,314. Baltimore ranks 22nd at $25,062.

Young said the financial costs of college are something parents should discuss with kids before they start looking for schools.

“We absolutely advocate being upfront with your kids about it,” he said. “You don’t want to set yourself up for disappointment and argument when you get the financial aid package and you have to break it to your kid that this just doesn’t work.”

Parents also need to be attentive to their own long-term saving needs and not jeopardize their retirements to pay for their kids’ college, he said.

“In one sense that’s admirable (to prioritize college), in another, it’s perhaps short-sighted,” he said. “Make sure that you’re not shortchanging yourself.”

It is also a topic where parents probably should not listen to their kids. Sixty-three percent of kids in the survey said their parents should prioritize paying for college over saving for retirement.

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