Based on advice from the experts, here is what you need to know about saving for college.
One of the first components of your college savings plan is to define your goal. Not all college educations are the same, and you will want to consider early how you will define success.
College Costs. Your student will have a number of costs associated with their college years. These include:
- Room and Board
- Books and supplies
- A computer
- Miscellaneous expenses
These costs can vary greatly depending on the type of college or university your child will attend, so making a decision about their educational destination is important. You7r local community college will have lower costs all around than an Ivy League institution or a private or public university away from home.
Based on information from recent College Board surveys, students enrolling this year can expect the following tuition and fees over a four year time frame:
Private College: $93,000
State College/University: $24,000
Community College: $12,000
For a student enrolling in 12 years, these costs, assuming a 6% annual increase, would be:
Private College: $187,000
State College/University: $48,000
Community College: $23,900
Of course, these costs do not include room, board and other similar costs.
College Funding Sources. There are a number of ways that college students fund their education. These include:
- Parents' Savings
- Student's Savings
- Grants and Scholarships
- Student Loans
- Student Employment
In most cases, many of these factors come into play. But early on, parents should have a strategy for paying for college. Clearly, if at all possible, student loans should be avoided. These saddle your children with college loan payments long into their careers. And some careers make paying back student loans harder than other careers.
Experts recommend that parents first look at what percentages of costs might be borne through each of these resources. For example, you may want your student's savings from their pre-college years to pay 5% of the cost. Perhaps you will want your student to be employed part-time during their college years, paying perhaps another 5% of the cost. Each family's views on these sources will be individualized, so consider it carefully.
Calculating College Costs and Savings Needs. Once you have estimated the annual amount in today's dollars that you will need for your student's education, visit the College Board's College Savings Calculator to see how much you will need to save each month to be ready when your child hits his or her freshman year in college.