Saving for Your Child's College Education

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Saving for Your Child's College Education

What is the best way to start saving for a college education?

Students today can take advantage of a large number of loan, grant and scholarship opportunities to help them cover the costs of higher education. However, even with these financial tools, paying for college is still something you want to financially plan for.

Simply put, college tuition continues to rise, far outpacing inflation. Also, many college students who have to rely too heavily on student loans leave college with tens of thousands of dollars' worth of debt.

Fortunately, parents can take some measures to ease the financial stress that their children will face when starting college. It all comes down to starting a college savings plan early.

College Costs

Just how costly is college? The numbers are staggering. According to the College Board, a moderate budget -- which includes tuition, fees, and room-and-board -- for an in-state public university for the 2022-23 academic year came in at an average of $23,250.

That is high. However, consider the moderate average cost of a private college at the same time: That figure clocked in at $53,430.

Those are the prices now. Depending on how long your children have before they reach college age, you can bet that the costs of attending college will have risen even higher.

College tuition and fees are not falling. According to CollegeBoard.org, over the last 30 years (1992-93 and 2022-23) published in-state tuition and fees at public four-year institutions increased from $4,870 to $10,940, and private four-year universities increased from $21,860 to $39,400.

According to the College Boards Trends in College Pricing 2022, for the 2022 - 2023 school year, average annual cost increases varied based the type of institution:

  • Public Four-Year In-State: 1.8%
  • Public Four-Year Out-of-State: 2.2%
  • Private Four-Year: 3.5%
  • Public Two-Year: 1.6%

Should those trends continue, if your child has three years before he or she is ready for college, you can expect tuition to increase by a factor of 1.074. So, if the yearly tuition at your child's favorite college stands at $20,000 today, you can expect it to rise to $21,474 in three years. Moreover, if your children will not be ready for college until 10 years from now, you can expect that $20,000 tuition to rise to $25,353.

Of course, this assumes that college costs will continue to rise at their current rates. That may or may not happen. However, as a parent, you must consider that college costs will continue to rise.

According to EducationData.org, the average student loan debt for the Class of 2022 was $37,787.

Fortunately, saving for college does not have to be impossible for most parents.

Start Early

The key is for parents to start saving for college as early as possible. That way, parents will not have to put too much away every month. If your children are still in elementary school, for example, you can get away with stashing as little as $50 a month in a savings account devoted to your children's college education.

You can also take advantage of savings vehicles designed to help parents save for college. Some of these programs include the Coverdell Education Savings Account program and 529

College Savings Plans.

It is also never too early to begin researching potential scholarships and grants. These programs can help reduce the cost of a college education. Scholarships today are not only available for sports or athletic achievements. Students can receive scholarships based on their skills in foreign languages, community service or writing talents. Parents just have to research to find a scholarship program that fits their children.

These seem like small steps, but they can add up to significant savings. The key is to start taking these small steps as early as possible. 

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