College Planning
Step 2: Goal for College Costs

Step 1: Planning for a College Education | Step 2: Goal for College Costs | Step 3: College Funding Savings Plan

College Planning

To begin to determine a your goal, estimate what the cost of a four-year college education will be by the time your child is ready to attend. Table 2 below will help you determine this cost.

TABLE 2 - Estimating Your Child's College Costs

1. Enter your child's age. 6
2. Number of years until college; 18 minus your child's current age. 12
3. Annual college costs **

1. Enter your own estimate or
2. $7,000 public university
3. $14,903 private university

**Source: The College Entrance Examination Board; approximate annual costs of public and private colleges for the school year 1993-1994. The college of your choice may be more or less expensive than the average cost noted here.

4. College Inflation Factors: According to the College Board, college costs are increasing at a rate of 7% per year. Refer to Table 3 for the inflation factor based on your time horizon. 2.25
5. Future annual cost of 1 year of college; Line 3 x Line 4. $15,750
6. Future total cost of college:
Line 5 x number of years of college(4).

The College Inflation Factors chart below will help you determine how inflation will affect your savings. If, for instance, you have 10 years to save before your first child enters college, simply multiply the cost of college today by the inflation factor in the chart to estimate your college savings goal.

TABLE 3 - College Inflation Factors

No. of Years Until College Factor: Rate Of Inflation (7%) No. of Years Until College Factor: Rate Of Inflation (7%)
1 1.07 10 1.97
2 1.14 11 2.10
3 1.23 12 2.25
4 1.31 13 2.41
5 1.40 14 2.58
6 1.50 15 2.76
7 1.61 16 2.95
8 1.72 17 3.16
9 1.84 18 3.38
* The monthly investments have been rounded to the nearest dollar. These figures are meant to be used as a guide only and do not represent the performance of any mutual fund. Different types of investments may perform better or worse than the 10% assumed pretax rate of return referenced in the chart. After-tax return will vary with prevailing tax rates and your personal circumstances.
It is important to remember that past performance does not guarantee future results.