Saving for college education is something many parents take for granted not realizing the enormous burden it may incur when it is actually time to ‘pay’. At the same time, not taking into account the rising educational expenses in 10 to 15 years time could also be a costly mistake. In any event, parents should make plans for their children’s college education from the day the child was born or else at least 5 to 10 years before the child starts going to a college.
When planning to save for college education, the first thing parents need to do is to figure out an estimated expense for their child’s college education by the time the child reaches 18 years of age. In order to do this, one may use an online college expense calculators published by many different institutions and organization. Usually these calculators are free to use and would require the person to submit present yearly expense for college tuition, years of college, the amount at hand, years until the college begins, expected interest rate and the expected inflation rate. Based on these values, the calculator will indicate the amount of money one needs to save per year in order to fulfill the financial demand of college education in the future. For some calculators, there may not be a necessity to provide most of these information although the output they give would be rather comparable.
To make the calculation easier, some analysts have published the average costs for tuition in each type of college education and accordingly, public college education at present is estimated to be around $12,841 while private college education will cost around $27,677. At the same time, Ivy League college education will cost around $36,604. However, these estimates may vary from the stipulated expense and should be double-checked from several authorities before arriving at a conclusion. Furthermore, experts predict that college tuition fees usually increase at 5–8 percent each year.
Another means of calculating the potential cost for future college education is to look at the trends of college pricing in the past few years. One such example is the report prepared by the College Board – Advocacy and Policy Center. In this report, they have recognized patterns pertaining to published prices, variation in published prices, net prices, institutional finances, enrollment and income etc. At the same time, in another report, they look at the patterns of student financing in relation to scholarships, loans and other modes of funding. By looking at these reports, it should be possible to gain an idea regarding the potential college education cost in 5–10 years from now along with the possible modes of funding.
In any event, no matter how much calculation one does, it will ultimately boil down to the amount of money one saves in hope of funding his or her child’s college education. Therefore, the best thing a parent can do is not to wait until the last minute to start saving, but to invest yearly in one of the college education saving funds such as the 529 plan which is a state initiative to secure funding for future college education.