College costs may be soaring, but American families are saving less money for higher education.
The average American family that’s saving for college put away about $2,600 last year and has a total of just over $10,000 socked away for education, according Sallie’s Mae How America Saves for College, the lowest amount since the survey began in 2009.
“Parents understand the importance of saving for college, but putting theory into practice is easier said than done,” Michael Gross, a vice-president at Ipsos Public Affairs said in a statement.
The average cost of attendance this year is $19,000 for public colleges and $33,000 for private colleges, according to The College Board.
Last year, parents covered about 30 percent of their children’s college expenses, with the remainder coming from student contributions, student loans, grants and scholarships, according to a separate Sallie Mae report. To reduce costs, families are increasingly cutting back on spending in other areas, choosing a school that’s closer geographically and considering part-time options.
Today’s study found that parents put aside about 10 percent of their total savings for college, with about half keeping the funds in a general savings account and a quarter using a tax-advantaged account such as a 529.
Money in a 529 plan grows tax-free and distributions used for higher education are not taxed. Some states also offer a deduction on contribution. Check here for more information on your state’s plan.