Students Need ‘Bs’ to Keep Parents’ Cash Flowing, Fidelity Says

Two-thirds of U.S. parents said they’ll only pay for their children’s college education if they maintain minimum grades of B, on average, according to a survey by Fidelity Investments.

The average grade point parents will require to pay tuitions is 3.1 out of 4.0, or about a B, once their kids are in college, based on the survey of almost 2,400 families released today by the Boston-based mutual-fund company. Seventy-five percent of respondents said they don’t want to burden their children with college loans compared with 65 percent in 2007, when Fidelity started the annual study.

“You see folks significantly changing their overall lifestyle and part of that is shared accountability,” said Joseph Ciccariello, vice president of college planning at Fidelity, the third-largest administrator of 529 college savings plans. “It’s between the parents and their child in the cost of college, and both parties are making sure they pay for it.”

Tuition and fees for in-state students at public four-year institutions averaged $7,605 for the 2010-2011 school year, according to the New York-based College Board. At private nonprofit four-year colleges and universities, costs averaged $27,293.

To manage college expenses and generate additional income, more parents said they’re encouraging their children to attend public colleges or universities, work part-time and help pay for college, the report said. Almost half are considering having their kids live at home and commute compared with 38 percent in 2007, and 28 percent are asking their children to graduate in fewer semesters compared with 13 percent in 2007.

Saving Earlier

More parents are also beginning to save earlier, with 40 percent of those with children under 5 years old saving for college costs in a dedicated savings account, such as a 529 plan, compared with 27 percent in 2007.

“More parents are starting to save in the preschool years, despite financial pressures,” Ciccariello said. “They don’t want to carry the debt burden when their children get out of college.”

A separate survey from Bank of America Corp. (BAC) earlier this month said that about half of respondents with assets of more than $250,000 won’t pay the entire tab for their children’s college education. Having kids foot at least part of the bill will help teach them financial responsibility, 29 percent of parents said.

Research Data Technology, an independent research firm, conducted the online study on behalf of Fidelity among 2,383 families with children 18 and younger. The families had annual household incomes of at least $30,000 and were contacted from June 21 to July 5.

To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net

To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net.

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