A recent study completed by Fidelity Investments and MEFA found that most parents and their children don’t discuss paying for college. 

To deal with rising tuition costs, many parents need their college-aged students to share the burden of paying for college. The problem is, most of them have never actually told their kids. This was the main finding from a study conducted by Fidelity Investments and the Massachusetts Educational Financing Authority.

The study also found that parents are starting to save earlier for their child’s college education but are still having a hard time reaching their goals. 66 percent began saving for college before their child was five years old, which is a four percent increase since 2016. However, only 37 percent are able to reach their savings goals.

There is still good news to be found. Those results are still higher than the national average of 28 percent, and it’s 9 percent higher than the findings in 2016, according to Tom Graf, the Executive Director of MEFA. He said that the “survey results show we have the opportunity to build on those numbers.”

Though 66 percent of Massachusetts parents expect to cover most of the tuition costs themselves, many parents want their children to save $9,282, on average, by high school graduation. And 47 percent of parents feel that it isn’t their responsibility to cover all of the college costs. When the study first started in 2007, that figure was 60 percent.

But 47 percent of parents with a child who is in 10th grade or higher have not shared these expectations with their student. In 2016, this figure was 41 percent.

The study found that there are other college-related topics parents haven’t yet discussed with their child. Fifty-five percent of parents haven’t explained how the financial aid process works. And 54 percent of parents haven’t talked to their child about how much student loan debt they may have to take on.

Meanwhile, 83 percent of parents believe that dealing with their own student loan debt has made them better educated regarding financial topics. Yet 50 percent of parents aren’t sure what the best college savings plans are, and 51 percent don’t know how much they should save each month. Although 52 percent do have a financial savings plan in place, this is down from 57 percent in 2016.

Even more troubling: 71 percent of parents said they are familiar with a 529 plan but only 39 percent have opened one, which is a 7 percent drop from 2016. It’s not all bad news, though. The parents who have opened a 529 savings plan have saved an average of $32,200. In 2016, parents had only saved an average of $20,400.

Massachusetts also offers an annual in-state tax deduction for families who contribute to the U.Fund College Investing Plan, which is the Massachusetts 529 plan. The study concluded that Massachusetts parents would benefit from learning more about these incentives to save.

Although this study focuses on Massachusetts families and students, it’s an important reminder to start talking with your child sooner rather than later about paying for college. Setting expectations and coming up with a plan can help you prepare for the big investment you’ll be making in a college education. And the more money you have saved for college, the less you’ll have to borrow in student loans.

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A new ruling from the IRS allows employers to tie 401(k) benefits to student loan payments. 

On August 17, the Internal Revenue Service (IRS) told one unnamed employer that they can tie their employees’ 401(k) contributions to their student loan repayment benefits. This decision could pave the way for other employers to follow suit.

As more companies become aware of the student debt problem, many are becoming interested in offering student loan repayment benefits to their employees. Employers realize that offering this benefit is a good way to attract qualified employees and increase employee retention.

After all, data shows that 86 percent of younger employees are willing to stay with a company for up to five years if that employer is willing to help them pay back their student loans. Several well-known companies, like PricewaterhouseCoopers, Fidelity, and Staples, already offer their employees’ student loan repayment plans, according to Bloomberg.

However, they are still in the minority with only 4 percent of all employers offering student loan repayment plans. That could be partially due to the fact that when an employer helps an employee pay down their student loan debt, it’s considered taxable income.

The private letter ruling from the IRS addressed employers that want to offer a student loan repayment option that is connected to their 401(k) plan but is concerned about complying with the law.

In the program described in the IRS’ ruling, if an employee pays at least 2 percent of their annual salary toward their student loan debt, this will count as their 401(k) contribution.

This is good news for borrowers who need to continue making payments on their student loan debt but also want to continue saving for retirement. A study by the Center for Retirement Research at Boston College found that by age 30, college graduates with student loan debt had only saved half as much toward retirement as graduates with no student loan debt.

Prior to the ruling, it was unclear whether employers could offer a tax-free student loan repayment option. This ruling paves the way for employers to tie 401(k) payments and student loan repayment benefits together. And it gives employers the flexibility to design different plans offering student loan repayment benefits.

Attorney Jeffrey Holdvogt told Bloomberg this program offers the most benefit to employees who are paying down their student loan debt but not able to save anything toward retirement. He added that this ruling will likely cause more employers to offer a student loan repayment benefit as part of their retirement program.

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