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New Study Shows Grandparents Plan To Help Finance Their Grandchildren's College Education, But Few Have Coordinated Plans With Their Children
SIMSBURY, Conn.-(Business Wire)-September 5, 2008 - Banks are cutting student loans and financial aid packages are dwindling as the nation’s freshman class reaches an all-time high. This back-to-school season, there is good news for parents, according to a new 2008 study from The Hartford Financial Services Group, Inc. (NYSE: HIG). In a survey of grandparents, The Hartford found that 65 percent of grandparents plan to contribute financially to their grandchildren’s college education, but less than one third of all survey participants have coordinated college savings for their grandchildren with their adult children. Grandparents are ready, willing and able to help; parents just have to ask the question. Other key findings from The Hartford’s survey include:
- Contributions won’t come from everywhere, but they will be significant. Over half of grandparents who plan to contribute will give more than $10,000, with a quarter of those planning to contribute over $30,000, to their grandchildren’s college education.
- Grandparents already spend on their grandkids. Over 40 percent of grandparents spend more than $2,000 annually on their grandchildren.
- Professionals can help. Sixty percent of grandparents believe their children could benefit from a discussion with their financial advisor.
In fact, parents may be surprised that so many grandparents plan to contribute. Advance findings of a College Savings Foundation survey of parents, expected to be released September 23, 2008 (www.collegesavingsfoundation.org), show that only 22 percent of parents expect grandparents to help with their children's education.
In advance of National Grandparents Day on Sunday, September 7, The Hartford offers these tips to provide young parents with the necessary information to start the college savings conversation with their own parents.
- Dispel misconceptions. Scholarships and grants may not be enough to cover the college bill. Sixty percent of The Hartford’s study participants believe financial aid is the most likely way their grandchildren will pay for college and 29 percent report they have not started saving because they believe their grandchildren may receive scholarship money to cover college costs. However, the reality is that scholarships and grants cover only 15 percent of the higher education price tag, according to a 2008 Sallie Mae/Gallup poll. Also, from 1997 to 2007, total federal aid declined from 66 percent to 58 percent of the total funds used to help finance postsecondary education, according to the College Board’s 2007 Trends in Student Aid study.
- Appeal to their pocketbook. 529 Plan contributions have significant tax advantages. Contributions may be deductible for state income tax purposes, investments grow tax-deferred and distributions taken for qualified education expenses are federal income-tax free1. Grandparents who open their own 529 Plan accounts with their grandchild as the beneficiary can determine how contributions are invested and when withdrawals are made. In fact, The Hartford found that 59 percent of grandparents who already have a 529 Plan opened it because they could maintain control over the investment. Furthermore, if the grandchild decides not to attend college, the account beneficiary can be changed – federal income tax free – to any of the current beneficiary's eligible family members, including other grandchildren.
- Make it easy. Parents should make it as easy as possible for grandparents to participate. Many 529 college saving plans, like The Hartford® SMART529® plan, offer gift coupons or special investment forms so grandparents can contribute whenever they want to, subject to the plan’s contribution limits. Investments over time on birthdays, holidays, milestones or “just thinking of you†gifts add up over time. The Hartford® SMART529® plan can also accommodate automatic investments from up to four bank accounts – making it easy for grandparents to systematically invest in the program for their grandchildren.
“This is vital information for grandparents who hope to leave a lasting legacy of education for their grandchildren and for parents planning to send their children to college,†says Jeff Coghan, director of 529 Programs at The Hartford. “Both parents and grandparents should seek out their financial advisors for more information about college savings programs. 529 college savings plans are one of the easiest and most effective ways to save.â€
The Hartford survey, which was conducted via the Internet by Praxis Research Partners in July 2008, interviewed 607 grandparents who have at least one grandchild under the age of 15 and who work with a financial advisor. This is The Hartford’s third annual college savings survey.
1 Non-qualified withdrawals are taxable as ordinary income to the extent of earnings and may also be subject to a 10% federal income tax penalty. Such withdrawals may have state income tax implications.
About The Hartford
The Hartford, a Fortune 100 company, is one of the nation's largest diversified financial services companies, with 2007 revenues of $25.9 billion. The Hartford is a leading provider of investment products, life insurance and group benefits; automobile and homeowners products; and business property and casualty insurance. International operations are located in Japan, the United Kingdom, Canada, Brazil and Ireland. The Hartford's Internet address is www.thehartford.com.
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The Hartford is a member of the College Savings Foundation, the leading non profit organization helping American families save for their children's college education.
Some of the statements in this release may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include those discussed in our Quarterly Reports on Form 10-Q, our 2007 Annual Report on Form 10-K and the other filings we make with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued.
SMART529® is issued by the West Virginia Prepaid College Tuition and Savings Program Board of Trustees and is administered by Hartford Life Insurance Company. For more information about SMART529®, please visit www.hartfordinvestor.com or contact your financial advisor.
You should carefully consider the investment objectives, risks, charges and expenses of SMART529® and its Underlying Funds before investing. This and other information can be found in the offering statements for the SMART529® plans and the prospectus or other disclosure documents for the Underlying Funds, which can be obtained from your investment representative or by calling 866-574-3542. Please read them carefully before you invest or send money. SMART529® college savings plans are distributed by Hartford Securities Distribution Company, Inc. Member SIPC.
If you reside or have taxable income in a state other than West Virginia, you should consider whether your state has a qualified tuition program that offers favorable state income tax or other benefits exclusively to your state's program that are not available under the SMART529® program. Taxpayers and residents of other states who are interested in exploring such tax consequences should consult with a qualified tax advisor.
This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.
SMART529® is a program of the Board of Trustees of the West Virginia College Prepaid Tuition and Savings Program, State Treasurer John Perdue, Chairman. The Board has selected Hartford Life Insurance Company to provide program management services for SMART529®.
Investments in SMART529® are not guaranteed or insured by the State of West Virginia, the Board of Trustees of the West Virginia College Prepaid Tuition and Savings Program, the West Virginia State Treasurer's Office, Hartford Life Insurance Company, The Hartford Financial Services Group, Inc. the investment sub-advisors for the Underlying Funds or any depository institution. Investments in SMART529® are subject to investment risks, including the loss of the principal amount invested, and may not be appropriate for all investors.
"The Hartford" is The Hartford Financial Services Group, Inc. and its subsidiaries.
"The Hartford" is a registered trademark of Hartford Fire Insurance Company.
"SMART529" is a registered trademark of West Virginia College Prepaid Tuition and Savings Program Board of Trustees.
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