Parents Strive to Help Kids Avoid College Debt Trap; Principal Financial Well-Being Index Shows Parents Want to Give More Financial Support Than They Received

Business Wire, March 13, 2003

Business Editors

DES MOINES, Iowa--(BUSINESS WIRE)--March 13, 2003

As many parents struggle under the burden of student loan debt, they're also working to make sure their kids don't face the same fate. However, many parents misjudge the amount of money it will take to reach that goal, according to the Fourth Quarter 2002 Principal Financial Well-Being Index(SM).

Parents do expect their kids to pitch in somewhat for the cost of their degrees; 76% of respondents said children should take partial responsibility for college costs. However, 67% say they want to finance the majority (51 percent or more) of their children's education, and over one-third (36 percent) of parents plan to pay 75 percent or more of college costs.

"Nearly half (41 percent) of the parents we surveyed had to pay for the majority of their education themselves. With college costs going through the roof, chances are they don't want their kids to deal with the same dilemma," says Jim Sager, director, The Principal Financial Group(R). "That's where a disciplined savings program - like an employer-sponsored 529 plan - can help."

Parents seem to be bracing for the worst when it comes to paying for college. More than half of those surveyed overestimated the current cost of earning a four-year degree from a public university, with 1-in-6 (17 percent) estimating the costs to be over $100,000. Yet nearly one-third underestimated the current price tag of a college education. Only 15 percent of those surveyed accurately estimated the cost to be in the $40,000 - $49,000 range.

Children whose parents are able to foot most of the bill for their education will graduate with a considerable advantage over many of their peers. Today, the majority of students are using loans to finance their college education, and the debt level of recent college graduates is escalating rapidly. The average student loan debt has doubled over the past eight years to more than $16,900, and 39 percent of student borrowers are graduating with unmanageable levels of student loan debt. (1)

"There's no doubt that helping to pay for your children's college education will benefit them greatly throughout their lives," asserts Sager. "Despite the rising cost of college, parents can achieve their college funding goals with careful planning and a disciplined approach to saving."

The Principal Financial Well-Being Index

The Principal Financial Well-Being Index is a quarterly study that identifies and tracks trends in consumer financial well-being, retirement planning, employee benefits and workplace trends. It is conducted by Harris Interactive and commissioned by the Principal Financial Group, the nation's 401(k) leader. The fourth quarter survey was conducted online among a national sample of 1,654 employees of growing businesses (10 to 1,000 employees), weighted to reflect that population, during November 2002. "Propensity score" weighting was also used to adjust for respondents' propensity to be online. With a probability sample of this size, one can say with 95 percent certainty that the results have a statistical precision of /- 2.4 percentage points; however, this was not a probability sample.

About the Principal Financial Group

The Principal Financial Group(R) (The Principal (R))(2) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and mortgage banking through its diverse family of financial services companies. More employers choose the Principal Financial Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States(3). A member of the Fortune 500, the Principal Financial Group has $111.1 billion in assets under management(4) and serves some 13 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

About Harris Interactive(R)

Harris Interactive (www.harrisinteractive.com) is a worldwide market research and consulting firm best known for The Harris Poll(R), and for pioneering the Internet method to conduct scientifically accurate market research. Headquartered in Rochester, New York, U.S.A., Harris Interactive combines proprietary methodologies and technology with expertise in predictive, custom and strategic research. The Company conducts international research through wholly owned subsidiaries - London-based HI Europe (www.hieurope.com) and Tokyo-based Harris Interactive Japan - as well as through the Harris Interactive Global Network of local market-and opinion-research firms, and various U.S. offices. EOE M/F/D/V

(1)National Postsecondary Student Aid Study, Department of Education, 2000

(2)"The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.