Published on November 05, 2018
Written by Financial Planning Team
When families talk about college, the subject of money is never far behind. It’s easy to understand why: the average student loan debt for class of 2017 graduates was $39,400, according to Department of Education data. That’s up 6 percent from the previous year, and the cost of education seems to show no signs of slowing down.
As parents and grandparents, you’re likely encouraging your children and grandchildren to go to college, hoping that a degree will help them land good jobs with higher earning power. But degrees are expensive. It’s especially daunting considering that many parents are still paying off their own student loans, while their children born today are faced with college costs that are rising at twice the rate of inflation.
So, what is the current price of tuition? Let’s look at data from The College Board, which provides nationwide net average costs to students. For the 2017-2018 school year, here are the average costs of tuition and fees for different types of schools:
Remember, room and board costs need to be added as well. The College Board reports that the average room and board at a public school was $10,800 in 2017-2018, and $12,210 at private schools.
One of the best things you can do in funding education is to start saving early. You may not think small amounts will matter but investing properly can lead to meaningful growth and a sizable college fund by the time your student heads off to school.
Let’s say you’ve got young children and can only invest $100 per month to start with. Assuming an annual investment return of 6%, your savings may have grown to $7,170.38 after five years.
By then, you may be able to bump up your education savings to $200 a month. Assuming the same 6% rate of return each year, you may have $21,511.14 five years later. By then, you may be doing a little better financially and will be able to double your monthly contribution again, to $400. At that rate, you may have more than $88,500 10 years later—which could pay a significant chunk of your child’s college costs.
Education is an investment, and there are a variety of tools available to help you build your college savings.
Each of these options has their own unique rules, tax treatments, and features that are best explained in person, in a discussion with a financial advisor. Servion Financial Advisors works with credit unions and community banks to help their clients. Some possible college savings tools include:
Sources: Nasdaq, Collegedata.com, Finaid.org
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