In recent years, college expenses have increased at 6 to 7 percent annually — a rate that far exceeds the rate of inflation. I really don’t understand why. I hope that this rate doesn’t continue indefinitely, because if that’s the case, about eight people will be able to afford to go to college in the future.
I hope that once we pay off our car, we’ll be able to start a college savings fund for our baby. But how much should we save?
Even if parents can afford it, I don’t think they should pay for 100 percent of their child’s college expenses.
A student will do better in the classroom and in life if he has to pay at least some of his way through. He’ll be more likely to try to cut costs (maybe he’ll decide to be an RA, or shop Amazon.com for cheaper books than can be found in the bookstore, for example). He might be more likely to go to class and put forth more of an effort if he’s paying some of the bill.
I realize that the earning potential of an 18-22 year-old is extremely limited. But still, they should contribute whatever they can to their schooling and living expenses.
So how much might college cost in 18 or so years, when little Johnny goes to college?
Some calculators estimate it will cost $175k to $200k to send him to an in-state public four-year school. I truly hope it doesn’t come out to be that much.
I fiddled with this calculator, and if we want to pay for 100 percent of his education, we’d need to save $375/month starting now. And that’s assuming we’re able to get a 7 percent return on our investment. Our investment could lose value, too.
If he wants to go to a private school, we’d have to sock away $870 per month. That is $100 more than my rent!
I’m sorry, but $375/month is just not realistic for us right now. We could possibly swing it, but that would mean we’d be life-long renters. That would be a problem during retirement.
I’m not yet sure how much we’ll be able to set aside. I’m hoping that with time, we’ll be able to increase our contributions.
I’m hoping that we’ll be able to cover at least 50 percent of his costs. I’d likely expect Jonathan to cover at least 20 percent of his expenses through summer and part-time jobs. Maybe the rest can be covered by scholarships, and finally, student loans.
How much are you planning to contribute to your child’s education?