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While college students across the nation continue to face increased loan debt and college costs, a recent survey shows another increase: More grandparents are assisting their grandchildren financially when it comes to paying for college.
According to the National Conference of State Legislatures, about 60% of the estimated 1.85 million college graduates from the 2013-14 school year will have an average of $26,500 in loan debt. The NCSL reports that tuition at four-year universities has increased by 112% since 1990.
No wonder many grandmas and grandpas want to help.
The study — 2014 Grandparents and College Savings Study conducted by Fidelity Investments – shows that at 53%, more than half of the surveyed adults, report saving or planning to save for their grandchildren’s college funds. Forty one percent of grandparents are currently contributing.
Chelsea Schultz, a sophomore Spanish education major at Temple University in Philadelphia, says her education is paid for by a mix of her grandparents’ contributions, her parents’ money and her own savings, scholarships and loans.
She receives a $2,500 check from her grandparents each semester. The money can be spent in any way she deems necessary, as long as the expense is related to her education — whether it is tuition, books or school supplies.
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Among the 1,001 respondents age 45 and older who have at least one grandchild under 18 years old, the average donation is $25,000. The median household income was $85,000. A little more than one third, 35%, of them say they contribute on a monthly basis, while another 35% say they contribute through other gifts.
Fidelity Investments’ survey indicates that grandparents are pitching in because they value higher education and think college degrees are essential to the success of students.
Schultz agrees with that finding.
“My grandparents and I have been very close my whole life and they believe in my ambition and dedication to my education,” she says. “They want to help me succeed as much as I can.”
Fidelity’s survey also shows that grandparents are aware of the rising costs of college, and how students and their families are struggling to meet those costs. Thirty seven percent of grandparents indicated concerns about their grandchild’s ability to pay back substantial loan debt. Many grandparents also have a feeling of family responsibility.
Bianca Provenzano, who graduated from California State University –Fullerton in 2011 with a degree in child and adolescent development, says her grandparents’ helped her because of their concern over her debt.
“They wanted to see me succeed and not end up in debt for years after I graduated,” she explains. “They wanted to know that I was financially secure after graduation and that I would be able to live on my own instead of using my salary to pay off loans for years.”
Provenzano says she is “extremely fortunate and extremely grateful” that her grandparents made the decision to help her. They had been saving money for her since she was born and had money transferred from their account into Provenzano’s savings account when she turned 18.
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“Words can’t really express how grateful I am,” she adds. “I would be in a lot more debt if I hadn’t received the money to pay back 80% of my loans.”
Marie Hopkins, Schultz’s maternal grandmother, says she wanted to contribute to her granddaughter’s college education to give her something she never had.
“It’s something that will carry her anywhere she wants to go in this world, an education,” Hopkins says. “It is the greatest gift I think I can give to her. I think it will prolong my memory and the great relationship we share.”
The maternal grandparents of Ciomara Antonetti, a senior majoring in psychology at the University of South Florida, decided to help pay for her college after her father died when she was 16 years old.
When she started college, she had a Bright Futures scholarship offered by the state of Florida as well as a grant and loan through FAFSA.
Unfortunately Antonetti lost the scholarship because she was unaware she had to renew it every year. Her grandparents now help her with what her loans cannot cover.
Ramona Cruz, Antonetti’s grandmother, says she is helping her grandchild pay for college because she did not have the opportunity to attend a university and is “living through her.”
“She’s my granddaughter and I love her and I’m very proud of her,” she says. “I don’t want her to worry or stress so she can graduate.”
Keith Bernhardt, vice president of college planning at Fidelity Investments, says paying for college has become “a team effort.”
“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, ” Bernhardt states in a news release about the survey.
The ways in which grandparents provide financial aid varies. Some set up trust funds, some directly hand their grandchildren cash or checks, some create special bank accounts and some utilize 529 college savings plans.
According to Savingforcollege.com, a 529 plan is an “education savings plans operated by a state or educational institution designed to help families set aside funds for future college costs.”
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Almost every state has at least one 529 plan option, and 529 plans can be used for out of state colleges. Certain plans are also eligible for special tax benefits.
The Fidelity Investments report shows 52% of surveyed grandparents are familiar with these education plans.
A similar study conducted by Met Life in 2012 indicates that 29% of grandparents have financially supported their grandchildren when it comes to higher education, compared with the 41% who are currently supporting their grandchildren and the 53% who are planning to save for them. The average contribution in 2012 was $8,276.
Provenzano, who thinks the growing trend will continue, attributes contributions to increases in tuition.
“As the cost of tuition goes up, they are stepping up to help their grandchildren out,” she says. “Helping finance their grandchild’s education is something that seems to bring them joy. Also, I think it is an easy way to pass on the wealth they have to their grandchildren.”
However, Dana Chiki, who expects to graduate from Valencia College in Orlando, Fla. after the fall 2014 semester with an associate’s degree in American Sign Language Interpretation, believes otherwise.
Chiki, who plans on transferring to the University of North Florida next spring, says she doesn’t expect the trend to further increase as times goes on because loans continue to increase and debt accumulates everyday.
“Our government will be so much in debt, that by the time we’re grandparents we’ll have nothing to put aside for future generations,” she says. “Student loans will just continue to grow and pile on every college student who attempts to go to college.”
Justine Paige Dela Rosa is a rising junior at California State University-Long Beach
Filed under: VOICES FROM CAMPUS Tagged: finances, grandparents, Justine dela Rosa, study, tuition