College Savings Calculator: How Much Do You Need to Save?

By Tom Sedoric and Casey Snyder

For many families, paying for college becomes a concern right about the time kids are, well, born. Higher education costs have become grossly engorged in the past decades— average tuition prices have increased 1,200% since 1980 alone. In 2020, the average tuition and fees for a public college ran about $9,403 and $34,059 for private colleges. If your heart skipped a beat reading those numbers, you’re not alone.

Parents who plan on saving for college are faced with the ominous question, “How much do I need to save?”. It’s hard to know exactly how much you’ll need to save, considering that your child might opt for a public university versus a private school, receive scholarships, or pursue a lucrative career within the trades. Thankfully, there are tools like our college funding calculator that can help you determine just how much you’ll need to save based on different variables.

Why Have Tuition Costs Increased So Dramatically?

Before we dive into the details on saving for college, we feel it’s important to explain why college tuition has increased 1,200% in the past four decades. There are three main factors that have contributed to these truly ghastly changes. First, a decrease in state funding nationwide—which fell from $8,800 (2007 - 2008) to $8,200 (2018 - 2019), while the share of tuition in college revenues increased. On top of that, the cost of providing education has rapidly risen in recent years, further compounding the issue.

We’re also seeing a higher demand for college education. Between 2000 and 2018, undergraduate enrollment spiked by 26%, highlighting how degree programs have been lauded as the “only” option for students exiting high school.

The final cause is an increase in Federal Aid for students. According to a study from the New York Fed, every dollar in subsidized federal student loans increases college tuition by $0.60. All of these causes are accelerated by one another, feeding into a beast that leaves graduates with an average of $28,950 in debt (and that’s just for students earning a bachelor’s degree).

Making Higher Education More Affordable

If we’ve scared you, good—we’ve made our point. Higher education must become more affordable. For many families, sending their children to college is completely infeasible. More so, the cost-benefit ratio of going to college is rapidly decreasing, and for parents with more than one child it can be extremely difficult to find a reasonable path forward.

As the needs of workplaces rapidly evolve, it’s critical to evaluate what kind of education is necessary in the pursuit of career goals. Today, there are many more educational opportunities available in addition to traditional four-year undergraduate programs at public and private institutions. Tech and trade schools are an excellent option for students who are more interested in learning a trade or manual skill. Many of these programs are affordable, too. The average education at a trade school costs around $33,000 total, which is the price of just a single year at many private colleges. 

Community colleges are also an excellent alternative. They provide comparable education for a mere fraction of the cost of public and private universities. More often than not, community colleges have active outreach programs with local businesses, leading to many students securing a job offer before graduation.

Using Our College Savings Calculator 

While saving for college may be a daunting task, it’s far from impossible. Armed with the knowledge that there are plenty of alternatives to private and public universities, and educating yourself on financial aid (including grants and scholarships) available to your child, can help make the college savings experience more manageable.

Our college savings calculator helps families determine how much they need to save based on these variables:

• The number of years until your child will enter college 
• The number of years your child will attend college based on their prospective career path
• The estimated annual cost of the college (including all tuition, fees, housing, etc.) 
• The rate of inflation you expect for college costs 
• The amount you presently have saved (in both your and your child’s name) for college expenses 
• The after-tax return you expect on your investments (0% to 10%, but we think 4-5% is a realistic number) 

Use this calculator to plan out different situations—one where your child attends private school, one where they choose a trade school, and so on. This will help you get a sense of the higher and lower ranges you’ll need to plan and save for.

At the end of the day, knowledge is power. This is particularly true when it comes to your finances and preparing for the future. Whether you’re saving for college or retirement, understanding your finances will prepare you for whatever comes your way.

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