Paying for higher education can be a challenge, but time is one of your most valuable assets — the sooner your saving begins, the more time your money has to potentially grow.
Also, because of the accrued interest that accompanies loans, it costs more to borrow to fund college than it does to save. Sticking to a solid savings plan can reduce or maybe even eliminate the need to borrow.
Here are five steps that may help you identify and reach your college savings goals.
The cost of college will vary by institution, the rate of tuition hikes, the financial aid, grants and scholarships you receive, the length of enrollment and the amount borrowed.
The average annual cost for a four-year public, in-state college for the 2018–2019 academic year school year is $21,370.1 Private colleges have higher costs with an average of $48,510 annually.1
The actual cost of college is more than just tuition. It can also include room and board, books, supplies and other living expenses. But the cost may be less than the sticker price, depending on the amount of scholarship and aid you receive. To determine net college costs, factor in all expenses and subtract grants, scholarships and other aid and tax benefits, such as an education credit.
A good savings plan starts with goal-setting. Setting goals as a family is a great way to get everyone involved from the outset. Begin with potential costs for college, focusing on desired schools (in-state, out-of-state or private) and expected living expenses. This will give you an estimate of what to aim for.
Take inventory of your family expenses. How can you cut monthly costs and divert the funds you would have spent into your college savings fund?
The best method for saving is often thought to be starting early and contributing on a monthly basis. Financial experts suggest striving for at least 70 percent of future college costs. Figure out how much you can contribute to the fund monthly and re-evaluate the contribution regularly.
Understanding the features and tax benefits of college saving vehicles can help you develop an appropriate plan for your family’s situation. Savings plans can include one or more of the following:
In addition to traditional savings or loan options, the rising cost of education encourages thinking outside the box. Here are a few less traditional means of funding college.
Learn more about saving for education.