Estimating 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 2012, the average annual cost of in-state tuition, fees, room, and board at a four-year public institution is $17,860 for the academic year 2012–2013. For a private institution, the cost of tuition, fees, room, and board is $39,518. Both public and private colleges and universities experienced an increase of more than 4% from the prior year, 2011–2012. Although the average tuition increase at private four-year schools is 4.2%, nearly two-thirds of 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 2022–2023 academic year, the estimated tuition will be $76,333. Based on the projections below, a four-year education would cost approximately $305,000. 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.
|Public Colleges & Universities||Private Colleges & Universities|
|School Year||3% Inflation||6% Inflation||10% Inflation||3% Inflation||6% Inflation||10% Inflation|
Figures are estimated projections based on the average cost of tuition at public and private universities for the 2012–2013 academic year.
How Much Do You Need to Save?
By starting a disciplined savings plan now, you may be better positioned to help 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.
|Save per Month||5 Years||10 Years||18 Years|
For illustrative purposes only. Not indicative of any particular savings vehicle or insurance product.
Many parents postpone planning education funding because the task seems overwhelming, or they think saving the required amount of money will force them to compromise their current lifestyle. While these are legitimate concerns, they need not stop you from 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 early, and as much as possible.
The information contained in this article is for general use and while we believe all in formation to be reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any insurance or securities products and services. Written and published by Liberty Publishing, Inc. Copyright © 2013 Liberty Publishing, Inc. EDCJ0U1-04
The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.