The College Board reports that prices at public colleges have risen more than 30 percent over the past five years, even after adjusting for inflation. For the 2007-2008 school year, average published tuition and fees were up approximately 6 percent at four-year public and four-year private colleges. Increases at two-year colleges were somewhat less, approximately 4 percent.*
Consider this: The average published tuition, fee and room and board for a student at a public four-year institution in the 2007-2008 school year was $13,589. Just five years earlier, the average cost was $9,672. That's a 40% increase. For students at a private four-year institution, the current average cost is $32,307, compared to $24,867 five years earlier, a 30% increase.* Note that these are average estimates that do not include incidentals such as spending money and travel.
These figures might seem daunting, but may not be as insurmountable as they seem. The reality is that the savings needed to send most students to college are below these averages. Student loans, financial aid, scholarships, and grants reduce expenses for many. Students’ earnings, and other sources of income, may also reduce the amount you’ll need to save.
It helps to set your college savings plan early, preferably as soon as your child is born. Like buying a house, the more you save, the less you’ll need to borrow. Save and invest regularly, even if it’s just a small amount from every paycheck. Over time, look for ways to boost your college fund savings. Salary increases, bonuses, and money your child receives as a gift are good opportunities to increase savings contributions.
There are many options for college savings plans and investing money for educational expenses, and some provide tax advantages. This article overviews several choices: money market and bank savings accounts, government bonds, stocks, and mutual funds, as well as government-sponsored plans designed to help you build your college expense fund.
* Source: Trends in College Pricing, College Board, 2007.
