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Crash course in saving for your child's college education

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Did you know? For 2017-2018, the total four-year cost of sending a child to college can be anywhere from $80,840 to $178,480.1

How much does college cost?

The cost of college varies depending on what type of school your child wants to attend.

  • For 2017–2018, the average yearly tuition was $9,970 at an in-state public college, with room and board averaging an additional $10,800 per year.1
  • That cost nearly triples, though, if your child wants to attend a private college, with annual tuition costs averaging to $34,740 and room and board averaging an additional $12,210 per year. 1
  • This means that the total current four-year cost of sending a child to college can be anywhere from $80,840 to $178,480. And historically, college costs increase faster than the general inflation rate.1

We have good news, however: the figures above don't take financial aid into account. So how much will you actually be paying for your child's college education — and how much should you save — varies based on your family's financial status and the college your child chooses to attend.

How should I be saving?

Starting a fund for something as large as college tuition can seem scary, but with the right planning, it can feel more manageable.

Usually, it costs less to save than to borrow. Every dollar you borrow can end up costing you up to two dollars by the time the debt is paid off. In an ideal world, you should be saving as much and as early as possible.

Savers have also found it useful to set up automatic payments to a savings account. That way, the same amount is automatically transferred from your checking account each month, and you don't have to remind yourself to save. “529" accounts are a common way to start saving very early on, with bonus tax benefits.

There are two categories of 529 Plans2: prepaid plans and savings plans. A prepaid plan allows you to, yes, pre-pay all or part of the costs of an in-state college education. With the more common savings plan, though, you invest your contributions in a menu of mutual funds or similar investments. You can choose a mix of investments that embody an appropriate amount of risk, considering the target date for your child to start college and your comfort level for volatility. Some “target date" investment options will even dial down the risk for you over time, as the need to withdraw the funds approaches.

My child is entering college, and I haven't saved enough – now what?

You certainly still have options.

You should first work to maximize your financial aid packages. Many high schools offer financial aid information seminars, which will help you do this. And the financial aid office at the college your child chooses can help you navigate among the array of grants, loans and work-study available from federal, state and college sources.

There are multiple loan options. Your child can take on a student loan by applying for federal aid (by far the cheapest option) or a private student loan. As a parent, you can work with your child's college to come up with an interest-free payment plan; you can also apply for a Federal PLUS loan or a parent's education loan from a private bank.

Learn more about how to get started with a college savings plan

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Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. College Board, Annual Survey of Colleges. Back
  2. Subject to approval. Back

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