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Estimating Future College Costs

For most people, a child’s college education is the second most expensive purchase (after that of a home) they will ever make. For parents and grandparents who wish to estimate the cost of a college education, the following tables can facilitate an educated guess.

According to The College Board’s Trends in College Pricing 2013, the average annual cost of in-state tuition, fees, room, and board at a four-year public institution is $18,391 for the academic year 2013–2014. For a private institution, the cost of tuition, fees, room, and board is $40,917. Both public and private colleges and universities experienced an increase of nearly 3% from the prior year, 2012–2013. Although the average tuition increase at private four-year schools is 3.7%, many students in this sector attend institutions with tuition increases of between 3% and 6%.

If the cost of a college education increases by 6% annually, and your child enters a private college in the 2030–2031 academic year, the estimated tuition will be $120,163. Based on the projections below, a four-year education would cost approximately $480,652. For young families, skyrocketing cost projections can lead to sticker shock, but there are strategies that can help you keep pace with tuition hikes. The College Board reports that almost 75% of undergraduate students receive some type of financial aid. In addition, the Federal government offers tax breaks for education savings, as well as other credits and deductions for taxpayers currently facing college costs.

Use the table below to estimate the approximate annual cost of tuition, as well as room and board, for a four-year undergraduate education based on the year a child will enter college, the inflation forecast, and the choice of a public or private institution. ------------------------------------------------------------------------------------------------------------------ Projected Higher Education Costs ------------------------------------------------------------------------------------------------------------------ Public Colleges & Universities Private Colleges & Universities ------------------------------------------------------------------------------------------------------------------ School 3% 6% 10% 3% 6% 10% Year Inflation Inflation Inflation Inflation Inflation Inflation ------------------------------------------------------------------------------------------------------------------ 13–14 18,950 19,525 20,316 42,161 43,440 45,201 14–15 19,526 20,729 22,444 43,443 46,120 49,934 15–16 20,120 22,008 24,794 44,765 48,964 55,163 16–17 20,732 23,365 27,390 46,126 51,984 60,939 17–18 21,363 24,806 30,258 47,529 55,190 67,321 18–19 22,013 26,336 33,427 48,975 58,594 74,370 19–20 22,682 27,961 36,927 50,465 62,208 82,158 20–21 23,372 29,685 40,794 52,000 66,045 90,761 21–22 24,083 31,516 45,066 53,581 70,119 100,264 22–23 24,815 33,460 49,785 55,211 74,444 110,764 23–24 25,570 35,524 54,998 56,890 79,035 122,362 24–25 26,348 37,715 60,757 58,621 83,910 135,175 25–26 27,149 40,041 67,119 60,404 89,085 149,330 26–27 27,975 42,511 74,147 62,241 94,580 164,966 27–28 28,826 45,133 81,912 64,134 100,414 182,241 28–29 29,703 47,916 90,489 66,085 106,607 201,324 29–30 30,606 50,872 99,964 68,095 113,182 222,405 30–31 31,537 54,010 110,432 70,166 120,163 245,694 Figures are estimated projections based on the average cost of tuition at public and private universities for the 2013–2014 academic year.

How Much Do You Need to Save?

By starting a disciplined savings plan now, you may be better positioned to meet your child’s future education needs. The following table shows the return of a variety of monthly savings contributions, earning 6% interest, for intervals of 5, 10, and 18 years—the average college age. This hypothetical example assumes a 25% Federal tax rate and 3% inflation. Savings Growth at 6% Save per Month 5 Years 10 Years 18 Years $50 $3,109 $6,454 $12,339 $100 $6,219 $12,909 $24,678 $250 $15,549 $32,273 $61,696 $500 $31,099 $64,546 $123,392 $1,000 $62,199 $129,093 $246,785 For illustrative purposes only. Not indicative of any particular savings vehicle or insurance product.

Many parents may feel overwhelmed by the daunting task of planning for education funding, or think that saving the required amount of money will severely compromise their current lifestyle. While these are legitimate concerns, they need not stop you from establishing and maintaining an effective college funding plan. Whether you are considering a public or private college education for your child, the key to effective planning is to begin saving as early, and as much, as possible.

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