News and Information
Emory University
Atlanta, GA 30322

Release date: May 1999
Contact: Elaine Justice, Assistant Director

Saving For College Should Be Top Priority For Parents

The situation is frustrating, but Julia Perreault, director of financial aid at Emory University, sees it all the time. Parents who've saved money faithfully for their child's college education find out that another family, with the same annual income but no savings, is eligible for more financial aid than they are, says Perreault, who recognizes the perceived savings disincentive built into the current system.

In response, the College Board and college aid administrators have developed a better method of assessing a family's ability to pay, she says. In the 2000-2001 academic year the formula used to calculate need-based aid will take into account families' need to save to finance their expected contributions for college. This change in methodology is designed to prevent a family's being penalized after saving conscientiously for college.

Savings incentives recently have become a higher priority for legislators as well, says Perreault. The new Education IRA permits a contribution of up to $500 toward educational expenses of a child 18 or younger. Although the contribution is not tax deductible, amounts deposited in the accounts grow tax free until withdrawn.

The system must change to encourage more parents to save, Perreault adds, because "paying for college is primarily the family's responsibility." She lists several reasons for saving now, whatever your child's age:

o Parents often underestimate the cost of college. "Many parents think they are going to pay for it out of current income. They don't think of college as a long-term investment," says Perreault. She urges families to start planning when children are newborns by investigating any tax deferred savings plans or prepaid tuition plans available to them.

o Tuition increases may have slowed in recent years, but room and board cost increases keep going strong. "For example, in Georgia parents may see the state's HOPE Scholarships as an answer to rising college costs, but HOPE only covers tuition and vouchers for books at public schools and a fixed amount of $3,000 at private schools," says Perreault. "Parents need to assess all the other costs as well."

o Saving in advance can help keep your options open. "You never know which schools your children will want to attend, whether more affordable schools will offer what they want to study, or how well they will do in college," says Perreault. In Georgia, many families rely on HOPE Scholarships, but a recent study showed three out of four students lost their scholarship eligibility after their freshman year for not maintaining the required 3.0 GPA. Perreault also advises parents to look at tuition prepayment or state savings plans closely to find out if there is a penalty if your child opts not to attend college after all.

The best way for parents to approach saving for college is to take time to explore existing information on college funding, says Perreault. "We can help parents fine tune the details of paying for college once they have a clear understanding of the costs involved, the amount of the financial aid offer and the extent to which they can contribute."