By Sandy John
It’s a given that most costs rise over time, but the average cost of college seems to rise faster than other prices. In fact, the U.S. Department of Education reports that tuition at four-year public colleges rose an average of 5.5% for the 2017-18 academic year.
The average cost of a four-year public college was $21,370 for in-state students, including tuition, fees, and room and board in the 2017-18 school year. Getting an education at a private college is even more expensive, averaging $48,510 per year.
If your children are just toddlers, however, you’ll likely be facing even bigger price tags when they are ready to attend State U. If you assume college inflation will continue at about 5%, you could be looking at a four-year cost of nearly $180,000 at a state school by the time your current 3-year-old heads off to freshman orientation. That’s an annual cost of $44,426.
Should your child aspire to attend a private college for four years, you could face a total bill of more than $400,000.
Better start saving now. (Use a college cost calculator to run the numbers for your situation.) Keep in mind that while college is expensive, the majority of students pay do not pay the sticker price for school, getting help from financial aid and scholarships to reduce the cost.
When your kids are small, it’s tempting to put off concerns about expenses that are 15 or 16 years down the road and focus on current needs – like the fact that your kids outgrow their shoes about every three months. But the sooner you start squirreling away money in a college fund, the better off you are.
The longer the money is invested, the more time you have to take advantage of compounding.
If you could start putting aside $100 a month now and get a 7% percent rate of return, you’d have more than $30,000 available by the time your 3-year old is ready to enroll in college. If you contribute $200 a month, you’d have more than $60,000 by then. That won’t cover everything, but it will certainly reduce the amount of money you or your student will need to borrow.
If you’re saving for college, many advisors recommend opening a 529 college savings plan. These plans are designed to make it easy for parents to save for college and offer a variety of advantages, including:
Most students pay for college with money from a variety of sources, including family contributions, grants and scholarships, money they earn, and loans. Some three-quarters of students at public universities borrow an amount that’s equal to one-fifth of their family’s income to attend a year of school. Obviously, the more you’re able to save, the less your child will need to borrow.
You can also look for ways your kids can contribute to the cost of their education, such as by getting a job or reducing costs by living at home and attending community college for the first two years. The average cost of tuition and fees at a community college is less than $3,500, or about one-third of the tuition at a four-year public school. Eliminating room and board and paying lower tuition for two years could help you stretch your college savings to cover more college costs.
Financial Advisor Match BETA
No hidden agenda. No commissions or kickbacks.
Try our new algorithm-based, advisor matching program. Get access to bespoke financial advisors who have your best interests at heart.