By Beth Pinsker
NEW YORK, April 10 (Reuters) - Thanks to increased savings rates and a rising stock market, average balances in U.S. college savings plans jumped 30 percent in 2013 over the prior year, according to the new "How America Saves for College" report from Sallie Mae released Thursday.
Overall savings by American families grew 7 percent in 2013 over the prior year, among the 2,000 parents with children under 18 surveyed in November and December 2013 by Sallie Mae and Ipsos Public Affairs.
Still, savings lags far behind college tuition rates, which have risen exponentially in recent years.
The average published tuition and fees at U.S. public four-year colleges and universities jumped 27 percent between 2008 and 2014 (excluding inflation), and 20 percent for private, according to The College Board.
Among those who are actively saving for college, 51 percent have college savings funds of some kind, with an average balance in accounts of $15,346. The largest chunk, 45 percent, is in "general savings," while 29 percent use 529 college savings accounts, 14 percent use state prepaid tuition plans, 13 percent use educational savings accounts like Coverdells and 10 percent use bank accounts specified for minors.
More than half of families use a combination of college accounts. Another 18 percent participate in some sort of savings rewards program, like Sallie Mae's Upromise program, which coordinates with credit card spending to deposit cash back directly into savings accounts.
Some families like flexibility, and that's why they keep their savings in general accounts, say the authors of the Sallie Mae study, Sarah Ducich and Cliff Young. But that doesn't always keep the funds safe from being used for rainy days.
"They are using that general savings tactically - they have a chunk of money set aside that could be designated as college savings, but they could be using it for other things. In good times, they typically don't draw on it, but in bad times, they do," says Young.
HIGHS AND LOWS
Income disparity is a significant issue when it comes to college savings.
High- and middle-income earners are far more likely to use tax-defered savings vehicles like 529 plans, where most invest in stocks or bonds.
Lower-income respondents were more likely to keep their savings in bank accounts, and don't see much growth.
Although savings rates remained constant in 2014 from 2013, the cash value of the accounts of low-income families dropped 26 percent to $3,762 from $5,093.
"Lower income families do miss out on gaining market value," if they keep their money in interest-bearing accounts, says Ducich.