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.
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.
Copyright © 2004 Liberty Publishing, Inc. All Rights Reserved.
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