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Estimating College Costs

For most people, a child’s college education is the second costliest purchase (after that of a home) they will ever make. Estimating the cost of a college education, and the required savings to pay for it, is difficult, but the following tables can help you make an educated guess.

According to The College Board’s Trends in College Pricing 2003, the average annual cost of tuition, fees, room and board at a four-year public institution was $10,636 for the academic year 2003-2004; for a private institution the cost was $26,854. Public colleges and universities experienced, on average, a 14.1% tuition increase from the prior year, 2002-2003, while private colleges and universities experienced a 6.0% tuition increase.

If the price tag for a college education continues to increase 6% annually, and your child enters a private college in the 2010-2011 academic year, the estimated tuition will be $40,378. Based on the projections below, a four-year education would cost approximately $176,639. 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 60% of undergraduate students receive financial aid and almost 50% receive grants. In addition, the federal government pitches in with tax breaks for 529 plans and Coverdell Education Savings Accounts (ESAs) and by offering tax credits and deductions.

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.

Public Colleges & Universities
School Year	3% Inflation	6% Inflation	8% Inflation
04-05	10,955	11,274	11,487
05-06	11,284	11,951	12,406
06-07	11,622	12,668	13,398
07-08	11,971	13,428	14,470
08-09	12,330	14,233	15,628
09-10	12,700	15,087	16,878
10-11	13,081	15,993	18,228
11-12	13,473	16,952	19,686
12-13	13,878	17,969	21,261
13-14	14,294	19,047	22,962
14-15	14,723	20,190	24,799
15-16	15,164	21,402	26,783
16-17	15,619	22,686	28,926
17-18	16,088	24,047	31,240
18-19	16,571	25,490	33,739
19-20	17,068	27,019	36,438
20-21	17,580	28,640	39,353
21-22	18,107	30,359	42,502

Private Colleges & Universities
School Year	3% Inflation	6% Inflation	8% Inflation
04-05	27,660	28,465	29,002
05-06	28,489	30,173	31,323
06-07	29,344	31,984	33,828
07-08	30,224	33,903	36,535
08-09	31,131	35,937	39,457
09-10	32,065	38,093	42,614
10-11	33,027	40,378	46,023
11-12	34,018	42,801	49,705
13-14	36,090	48,091	57,976
14-15	37,172	50,977	62,614
15-16	38,287	54,036	67,623
16-17	39,436	57,278	73,033
17-18	40,619	60,714	78,875
18-19	41,838	64,357	85,185
19-20	43,093	68,219	92,000
20-21	44,386	72,312	99,360
21-22	45,717	76,650	107,309

Figures are estimated projections based on the average cost of tuition at public and private universities for the 2003-2004 academic year.

How Much Do You Need to Save?

By starting a disciplined savings plan now, you are better positioned to meet your child’s education needs in the future. The following table shows the return of a variety of monthly savings contributions, earning 6% interest, for intervals of five, ten, and the average college age—18 years. 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 put off planning education funding because they sense the task is overwhelming, or they think saving the required amount of money will force them to severely compromise their current lifestyle. While these are legitimate concerns, they need not get in the way of establishing and maintaining an effective college funding plan. Whether considering a public or private college for your child, the key to effective planning is to begin saving as early, and as much, as possible.

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