I just read through an article in Investment News that shared some trends and averages for the cost of sending a child to college today and wanted to share. Here are the highlights:
· According to the National Association of Independent Colleges and Universities, from 1998-2008, average private college year over year cost increases were 5.7% (many of you who have children may have heard me quote this “about 6% per year” number in the past).
· In 2009 and 2010, the average increase was 4.5%.
· In 2011, the average increase was 3.9% (thankfully the growth is slowing, but prices are still rising faster than the overall rate of inflation and the average middle-income earner’s cost-of-living adjustments at work).
· According to The College Board, the average tuition & fees for non-profit, private colleges and universities for the 2011-12 school year was $28,500. Add room and board and the total is $38,589 per year. The average amount a family pays after financial aid (grants and loans) is $12,970 per year, but given that most of that is Federally funded by Federally borrowed funds (e.g. the deficit/debt), counting on financial aid of this magnitude, especially in the form of grants, for the future is on par with counting on Social Security to be around in 20 years and continuing to operate the way it does today.
· For clients who have a goal of paying for all or part of college for their child(ren), we’re still using the ~6% annual increase in financial planning. We think it’s easier to plan conservatively and be pleasantly surprised than to plan aggressively and come up short, though we’ll ratchet back the expectations somewhat if the annual cost increases continue to slow. For now, using 6%, a child born this year and starting school in 18 years would face a staggering four-year total tuition, fees, room, and board bill of $481,846. Even using the 3.9% from last year, the total is $325,779 per child.
Save early and save often if you have a goal of paying for any substantial portion of that cost. In a future post, I’ll go through the best way to do that saving.