States and financial services companies promoting Section 529 college savings plans face an uphill battle this year as they kick off their traditional fall advertising campaigns.
Due to the faltering economy, parents are putting less money into their children's college saving accounts or delaying starting to save altogether, according to two separate surveys released last month.
One survey, commissioned by Omaha, Neb.-based TD Ameritrade Holding Corp., found that 36% of parents surveyed had stopped or reduced saving for their children's college education due to the economic climate, even though an overwhelming majority (87%) considered an education savings plan to be "extremely important" or "very important."
Another survey, commissioned by Futuretrust, a Philadelphia-based rewards company that is active in the 529 industry, found that 74% of parents surveyed felt that the dismal economy had affected the way they budgeted their money for college and that 21% had not even begun to save for their child's education and did not have plans to start.
"This is not something made up," said Deborah Fox, a financial planner and founder of San Diego-based Fox College Funding LLC, a company specializing in working with families to finance college education. "Parents are getting to the point where the high cost of college is so out of control that they give up before they start."
"In a challenging economy, people are not feeling as wealthy or comfortable and may reassess their priorities," said Jackie Williams, executive director of the Columbus-based Ohio Tuition Trust Authority, which oversees CollegeAdvantage, the state's 529 college savings plan.
However, she added, "we've found that an overwhelming majority of people are committed to long-term investing for college. Most people are committed to continued savings even if it means cutting back."
Saving for college is being emphasized this month as part of a statewide awareness and advertising campaign by CollegeAdvantage. Strong demand from political campaigns is driving up the cost of advertising this year, said Ms. Williams, who is also a former chairwoman of the Lexington, Ky.-based College Savings Plans Network.
"Radio and TV is more costly and not as effective," she said. "As a result, we decided that our existing clients were our best resource to deliver our message."
NEW PROMOTIONS
Toward that end, CollegeAdvantage will deposit $25 into the account of any participant who makes a referral that leads to the opening of a new account. The campaign also features an online contest in which state residents can enter and win up to a $5,000 CollegeAdvantage scholarship.
Meanwhile, The Road to College, a board game, is the centerpiece of a high-profile back-to-school campaign for the John Hancock Freedom 529 Plan, which is distributed by Boston-based John Hancock Distributors LLC and offered by the Education Trust of Alaska in Juneau. The game emphasizes rewards for savings for college and is part of John Hancock's effort to encourage financial advisers to address college savings when they speak to clients.
The game comes with a matching brochure for parents with advice on saving for college at various stages in a child's life. John Hancock will also be sending direct-mail literature and other sales ideas through October to advisers.
"While many clients would like to send their children to college, we've found saving for it is often so overwhelming, they get paralyzed," Terri Hayes, vice president of John Hancock College Savings in Boston, said in a statement. "Clients who begin to save — even in small amounts — hopefully will feel a sense of relief."
College costs can still be affordable if parents begin saving early and plan ahead, Ms. Fox said.
They also need use cash flow planning, she said, and they should match the child's profile with a college seeking a child with their child's specific strengths and wants to provide financial aid.
The Ameritrade survey was conducted last month by Princeton, N.J.-based Opinion Research Corp. among a random sampling of 1,005 adults with children.
The Futuretrust survey was conducted by Rochester, N.Y.-based Harris Interactive Inc. in June among 2,134 adults, 644 of whom were parents or expectant parents.
E-mail Charles Paikert at [email protected].
