How Much Do You Need to Save for College?
The answer to this question depends on several factors — including the number of children you have, how much you plan to fund their higher education costs and ultimately where they decide to enroll for college (which you won’t know until their senior year of high school). Obviously, the more children you have, the more you may need to save. If you have three or four kids, having a solid college savings plan can be helpful. Our College Savings Calculator allows you to estimate your college funding needs for up to six children.
You may decide not to fund 100% of your child’s college education. You may want your child to assume part of this financial responsibility by getting a job or an education loan to help pay for college. However, student loans can create years of financial stress for graduates as they repay this debt — which is why many students have a game plan of zero student debt these days. There are alternatives to student loans to consider as well, including grants, scholarships and work-study programs.
Perhaps the biggest factor determining how much you need to save for college is the actual school your child decides to attend and how much that college costs. The College Board’s Trends in College Pricing and Student Aid 2021 documented that the average published college tuition and fees for full-time undergraduate students for 2021-2022 were $3,800 (public two-year, in-district), $10,740 (public four-year, in-state), $27,560 (public four-year, out-of-state) and $38,070 (private nonprofit four-year). To help you refine your college savings plan, you may want to refer to U.S. News Best Colleges for rankings and information on selecting a college.
How to Estimate Annual College Expenses
In order to develop an effective college savings strategy, you first have to estimate what your child’s annual college expenses will be. College expenses can be broken down into these main categories:- Tuition and fees – Tuition covers your student’s class instruction by professors. Fees can include a broad range of expenses, including administrative costs, enrollment, building and campus grounds maintenance, recreation and sports facilities, student clubs and activities, health services and course-specific fees (e.g., scientific lab materials and field trips).
- Room and board – Costs to cover student housing and meals
- Books and supplies – Educational materials required for classes, which will probably include a personal computer
- Transportation – Travel expenses incurred getting to and from campus
- Personal expenses – Individual student budget items that might include clothing, laundry, off-campus meals, entertainment, etc.
The following price chart — showing data from the College Board’s Trends in College Pricing and Student Aid 2021 — provides you with average costs to begin estimating your annual college expenses:
2021-2022 Average Estimated Full-Time Undergraduate Budgets (Enrollment-Weighted) by Sector
| Tuition & Fees | Room & Board | Books & Supplies | Transportation | Personal Expenses | Total | |
| Public Two-Year In-District Commuter | $3,800 | $9,330 | $1,460 | $1,840 | $2,400 | $18,830 |
| Public Four-Year In-State On-Campus | $10,740 | $11,950 | $1,240 | $1,230 | $2,170 | $27,330 |
| Public Four-Year Out-of-State On-Campus | $27,560 | $11,950 | $1,240 | $1,230 | $2,170 | $44,150 |
| Private Nonprofit Four-Year On-Campus | $38,070 | $13,620 | $1,240 | $1,810 | $1,810 | $55,800 |
Don’t forget to account for those lesser miscellaneous college costs, too. To assist you with your college savings, here are some budgeting tips for common college expenses that fall outside the major price tags for tuition and fees and room and board.
The numbers don’t lie — college is expensive. As this College Board information illustrates, the total average estimated cost for a full-time undergraduate college education during the 2020-21 academic year can range anywhere from approximately $18,600 to almost $54,900. Multiply those average costs by four, and graduating with a college degree runs between about $74,400 and $219,600 in today’s dollars. These figures don’t even take into consideration inflation, which is 4.9% in 2023. However, our College Savings Calculator asks you to select an annual college cost inflation rate between 0% and 10% so you take all the necessary financial assumptions into consideration for an accurate estimate of your future college costs.
Funding Education With a 529 College Savings Plan
One way to approach your college education funding is to open a 529 college savings plan. Why is it called a 529? These plans are named after section 529 of the Internal Revenue Code and offer you some important tax advantages. First, your investment in a 529 plan grows tax-deferred and provides the student beneficiary with tax-free educational use of the money for qualifying expenses, which include tuition and fees, room and board, books and supplies. While you are not allowed to deduct 529 plan contributions from your federal income tax, some states permit deductions of all or some percentage of your contributions from your state income tax.
When setting up a 529 plan, you can choose either a prepaid tuition plan or an education savings plan. With a prepaid tuition plan, you as the account owner purchase credits for a specific participating college at today’s prices to apply toward tuition costs in the future. This kind of plan gets around having to worry about rising inflation. Alternatively, an education savings plan gives you more flexibility. These funds can be used for a variety of qualified educational expenses (not just tuition) at any university or college your student decides to attend.
Here are some additional 529 plan features:
- Most 529 plans have low minimum start-up requirements with the ability to set up ongoing scheduled contributions.
- Anyone (parents, grandparents, other relatives and friends) can open up a 529 plan account.
- In addition to the account owner, other relatives or friends can add money to the plan over time.
- There are no annual contribution limits, but each state has set a maximum accumulation limit.
- The 529 plan account owner is in control of the investment and makes withdrawals to allocate toward educational expenses; beneficiaries do not have independent access to money in the account.
- Beneficiaries can be changed by the account owner so another family member can use funds in the account if one child doesn’t need all the money.
Keep in mind that a 529 plan is an investment that carries risk and can fluctuate in value, so it’s important to select an investment fund that matches your risk tolerance. Learn more about 529 college savings plans, what to consider before you set one up and what you can do with any unused or surplus funds.
Using This College Savings Calculator
After indicating your current college savings and inputting your financial assumptions, our College Savings Calculator estimates the grand total of funds required as well as the amount of money you need to save on a monthly basis or to invest as a lump sum in order to reach your college savings goals for each of your children. A summary bar graph illustrates your college need versus available net capital over time. You also can view a detailed data table with an annual breakdown of financial information to see a progression of your accumulation of capital. Keep in mind that depending on the type of investment you select for college savings, your funds may not grow and can in fact lose money.
About Your Inputs
Our College Savings Calculator asks you to complete a brief set of data fields to collect information about your current college savings and the financial assumptions you want to make in order to estimate the growth of your funds over time.
Current Savings & Assumptions
This section asks you about your current level of savings and the financial assumptions you want to make regarding each of your children’s college funding needs:
- Annual college cost inflation – What annual percentage rate of inflation do you want to apply to your future estimate of college costs? According to the College Board, from 2021-22 to 2022-23, tuition and fees increased less than 3.5% across all sectors (e.g., in-state/out-of-state public versus private nonprofit colleges) before adjusting for inflation. The annual U.S. inflation rate was 4.9% in 2023. Enter a percentage between 0% and 10%.
- Amount saved so far – What total amount of money have you already set aside for college funding? Enter a dollar amount.
- Children – Our College Savings Calculator allows you to input information for up to six children. Enter the following data for each child:
- Current age – How old are they right now? Enter a number between 0 and 30.
- College start age – How old will they be when they begin attending college? Enter a number between 0 and 30.
- Years attending – How many years of higher education do you intend to fund? This period could include both undergraduate and graduate school (including professional degrees like law, medicine and engineering). Enter a number between 0 and 20.
- Annual amount – How much do you estimate their yearly higher education costs to be? Enter a dollar amount here. Keep in mind that some college savings investment vehicles cannot be used to pay for certain college expenses; some restrictions and limitations may apply to the use of these funds.
Other Financial Assumptions
This section asks you to set percentages for:
- Before-tax return on college savings – What percentage rate of return do you expect to earn on your college savings investment before paying taxes? A negative percentage means you will lose money because the value of your investment will decrease over time. A positive percentage means you will make money because your investment will increase in value. Click the question mark icon to view a graph of historic rates of return for 1926-2018. Enter a percentage between -10% and 10%. Keep in mind that past performance is not necessarily indicative of future performance.
- Marginal tax bracket – Indicate the percentage (between 0% and 75%) of federal taxes that you pay currently or expect to pay in the future when your child attends college. Keep in mind that your tax bracket may change.
- Annual increases – Do you plan to increase your yearly college savings contributions? Enter an annual percentage increase between 0% and 20%.
About Your Results
Based on your inputs including your chosen tax bracket and after tax return, our College Savings Calculator indicates the projected total amount of money you may need to meet your college education goals. In order to accumulate the necessary college savings for each child, you may choose either to invest a lump sum now or save a specific amount each month over the period of time you indicated before you need to access these funds to pay for active college expenses. Keep in mind that if you invest a lump sum, our calculator does not take into account fees and expenses. A college need and net capital bar graph highlights your total available capital and current college need in different colors for each year from now until you begin needing the money. In the final year, your net capital exactly equals your college funding need, and your savings naturally zero out.
Explore our variety of Financial Calculators to help assess your needs and achieve your financial goals.
