If your family recently welcomed a new baby, do you know what it will cost for them to obtain an undergraduate college degree?
Eighteen years from now, the total cost of four years at a public, in-state college could be more than $170,000 (including tuition, housing, food and fees), according to one college cost projector.
For a private, four-year college degree in 2043, the projected total cost is more than $400,000.
Costs increase if a student wants to pursue a graduate degree. For example, medical students graduating in 2030 can expect to pay upwards of $400,000 for their degree (including undergrad tuition and fees), according to an Education Data Initiative analysis.
This goes to show that even if your child is entering college now, costs are already high. And when you factor in student loan interest and potential lost income, a bachelor’s degree can cost more than $500,000, another analysis by the Education Data Initiative found.
Megan Walter, a senior policy analyst at the National Association of Student Financial Aid Administrators, says it’s important for families to stay informed about the options available to them.
“Staying engaged and informed over time is key, as financial aid policies evolve, state programs change, and new opportunities emerge,” Walter told The Independent via email.
Here are some key options for families who want to start saving for college today.
Start early
It’s never too early for parents to start saving for college expenses, Walter said. “Even as little as $10 set aside each month can make a meaningful difference down the road,” she wrote.
529 plans are one option for families who want to save for college. These plans offer families tax advantages and other incentives to help them save for college, according to the Internal Revenue Service. 529 plan earnings aren’t taxed at the federal level, and earnings are tax-free at the state level, if they’re used for qualified education expenses.
There are two types of 529 plans: prepaid and savings. Prepaid plans can be administered by states or colleges, and they allow families to “pre-purchase future tuition at a predetermined rate today,” according to the College Savings Plans Network, an affiliate of the National Association of State Treasurers.
Meanwhile, earnings in savings plans change based on the performance of the account’s underlying investments, which are chosen by the account holder, according to the network. These plans can only be administered by states.
Mary Morris, chair of the College Savings Plans Network, says some parents may even want to consider opening both types of accounts.
“I’ve talked to a number of people that will buy two years of a prepaid account, and then everything else they have they will put into a savings account,” she told The Independent. “And so, they feel like I’ve got something covered, in case my circumstances change, in case markets are doing terribly, or tuition has spiked.”
You aren’t limited to the 529 plans offered by your state, so Morris suggests shopping around. However, it’s important to review plans that your state offers, because some include perks just for residents, Morris said. The College Savings Plans network offers a state comparison tool to help you find 529 plans.
Educate yourself on financial aid policies
Parents should also educate themselves on how financial aid works and what options are available, according to Walter.
One key resource of information is the U.S. Education Department’s Student Financial Aid website. Parents should also keep an eye out for free financial aid sessions hosted by colleges and high schools, Walter explained.
“By checking in periodically with school counselors, community organizations, and colleges, families can ensure they’re positioned to make informed decisions when college draws nearer,” she wrote.
Check your sources
There are still several financial aid options available for families who don’t have college savings.
The Free Application for Federal Student Aid can help you determine eligibility for federal options, which include grants, loans and work-study jobs. Many students and families overlook filling out this application, sometimes because they think they won’t qualify or because it’s too complicated, Walter explained.
“Those are myths worth debunking, especially because schools and state agencies also use data from the FAFSA to distribute their own grants, scholarships, and other aid,” she said.
Walter also suggests that families explore “employer-sponsored tuition assistance, private scholarships, and education benefits for military veterans, active duty service members, and their families.”
Students and families who receive financial aid from multiple sources should also know their aid package could be impacted, Walter warned.
“In some cases, if the total aid received exceeds the student’s cost of attendance, it might lead to adjustments, such as a reduction in federal or institutional aid, to prevent over-awarding,” she said.