How Much Will College Cost In 2030

What College Tuition Will Look Like In 18 Years

Its not just the nation heading for a fiscal cliff.

Soaring education costs could end up rupturing your nest eggand bring your child to the brink of bankruptcy before he even gets his first job.

Even the top one percent may get a panic attack from the latest projected tuition rates.

Campus Consultants Founder and President Kal Chany figured out what college will likely cost by 2030 based on inflation rates. He wrote the book Paying for College Without Going Broke.

The findings? In 18 years, the average sticker price for a private university could be as much as $130,428 a year The situation isnt much better if you go the public route. Sending your child to a state university could set you back at least $41,228 a year.

Seuk Kim knows what hes up against. He has three kids under the age of three.

I am very concerned. I make a decent living to provide for my family, but we are a one income household, said Kim. We will likely have to rely on some financial aid or hope they can qualify for a scholarship. I would hate for them to have to take out a huge loan in order to pay for their education like I did.

He calculates hed have to save about $3,300 per month if he sends his children to the University of Virginia located near his home. Its a figure Kim says he cant afford.

Projected Tuition Costs Fall 2029- Spring 2030*

Us College Costs In 2030 And Its Significance For Society

IntroductionThe cost of higher education has been rising steadily in the past four decades, essentially doubling in real terms from 1970 to 2010, and it is expected to skyrocket by 2030. This will not be limited to the US, but it is expected to be a global phenomenon. Moreover, the high cost of college education will coincide with a massive surplus of college graduates and very difficult economic conditions, unless the current neo-liberal model of development is replaced with a mixed economy that produces new wealth and is not parasitic as is finance capitalism resting on the state for constant support and periodic bailouts. If higher education is a mirror of society as well as the source for change and progress, is it time to consider new models that will best serve society and not just a very narrow segment linked to the corporate structure?

1. Where is the cost of education head and what are the causes of high cost?

As a former university professor, I always heard the college administration argue that the costs of higher education follow the costs of medical care in the US, and that the rest of the world then emulates the American business model of education and health, at least in some respect. This prospect should concern citizens, largely because it means that a fair percentage of the population will be excluded from having access to higher education owing to cost, just as is the case in health care and likely to continue.

2. Where is the money going?

Save For Retirement First College Second

“I’m so glad we put money in our IRA first.”

It might seem like you face a difficult choice between saving for your child’s education and your own retirement. But almost all financial experts say this isn’t actually a tough call: You should save for retirement first. Before you start putting money away for college, make the maximum contributions to your retirement accounts, such as a 401 and an individual retirement account.

There are three reasons for this. One is that it’s easier to find another way to afford college grants, loans, or a cheaper option, like transferring from a community college to a four-year university than it is to support yourself in retirement.

Second, retirement accounts aren’t counted when colleges and the federal government figure out eligibility for financial aid. The government expects parents to contribute up to 6 percent of their available assets, including investments, per year to pay for college, but investments in 401s and IRAs are excluded. The additional financial aid application that some colleges expect, the CSS/Financial Aid Profile, also doesn’t count retirement assets, although it does ask about them.

So if you’re worried about paying for college, it might make sense to fund a personal Roth IRA before funding an employer-supplied 401 account. if your employer is matching contributions see here for more details.)

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How Much Will College Cost In 2030

Its no secret that college tuition is one of lifes biggest expenses, but todays costs could look small compared to those of tomorrow. According to the National Center for Education Statistics, the cost of a four-year education at public institutions rose 34 percent between 2006 and 2016.

Will College Tuition Continue To Rise

It’s official: college tuition is rising at a slower rate than inflation for the first time in over 30 years. Recently published data from the College Board show that between 2020-21 and 2021-22, nominal tuition rates increased 1.6% at public four-year colleges and 2.1% at private nonprofit schools.

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Why You Should Start Saving Early

Next to buying a home, a college education is the largest expenditure most parents will ever make . Faced with such a daunting task, you might be inclined to ignore the problem and wait until you are more financially settled before you start saving. But that would be a mistake.

The key to sanity in the area of education planning is advance planning. The earlier in the process you become informed about the potential costs and your saving options, the greater chance you will start saving. And the more money you save now, the less money you or your child will need to borrow later.

It is important to begin saving as early as possible so you can earn interest, dividends, and/or capital gains on as much money as possible. With a long-term savings strategy, you can hopefully keep ahead of college inflation.

Regular investments add up over time. By investing even a small amount of money on a regular basis, you have the potential to accumulate a significant amount in your childs college fund. The following table illustrates how your monthly investment can grow over time :

Note: The above example is for illustrative purposes only and does not represent the return of any investment. There is no guarantee that your investment will realize a return and there is a risk that you will lose your investment entirely.

First Figure Out What You’d Like To Cover

With multiple financial goals to juggle, most parents don’t plan to pay 100% of their kids’ college costs. It’s smart to think about how much you plan to pay well before that first tuition bill comes due.

If setting a target seems daunting, here are some helpful ways to think about it.

Split it

If you prefer to have your child shoulder some of the load either through working or taking a student loan, explain to them how much you plan to pay and how much you expect them to cover.

Figure out how much schools might expect you to pay

Many schools consider your expected family contribution a formula used to calculate federal financial aidwhen determining your tuition bill.

Plan to cover 100% of certain costs

For example, you might plan to save enough for:

• Room and board, books, and fees .
• The first 2 years of college .

Expected family contribution

The amount of money you’ll be expected to pay for college out of pocket, which influences the amount of need-based federal aid you’ll qualify for. It’s mainly based on parent income and assets, student income and assets, the size of your household, and the number of people currently attending college in your household.

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College Savings Calculation Example

College savings will look different depending on your childrens age when you start saving and household income. Keep in mind these college tuition estimates for 2039:

• $134,260 for a four-year, in-state public college
• $208,038 for a public, out-of-state college
• $336,216 for a private college.

Here are a few scenarios for you to consider:

• Monthly contribution: $610

• Overall savings with a traditional savings account: $64,033

• Overall savings with a 529 plan: $87,397

The earlier you start saving, the more likely youll be able to save enough for college. The second example above wouldnt likely cover a full 4-year education. If you start later, you might need to budget and try to contribute more each month or hope your child receives some scholarships.

Now, lets pair your savings amounts with whether you can actually afford future college tuition. Here are a few scenarios demonstrating figures that will enable you to save enough money for your childs college education.

$100K household In-state public college

• Household income: $100K

• Monthly contribution: $610

When Should You Start Saving With One

“The sooner they start saving, the more the earnings can compound,” said Mark Kantrowitz, a student loan expert.

If you start saving at your child’s birth, about a third of the college savings goal will come from earnings, Kantrowitz said.

“If you wait until the child enters high school, less than 10 percent will come from earnings and you will have to save six times as much per month to reach the same goal,” he said.

Despite the benefits of 529 plans, just 29 percent of parents use one to save for college, compared with 45 percent who keep their savings in a general bank account, according to Sallie Mae’s 2018 report, How America Saves for College.

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Some Colleges Offer Prepaid Tuition Plans

If you want to figure out how much to save, this calculator, which assumes that college costs will continue to grow at 4 percent per year and you’ll get a 6 percent rate of return on your investment, tells you how much you’d need to put away to pay for four years at a college of your choice.

If that’s too much uncertainty for you, it’s also possible to lock in today’s tuition prices through a special type of 529 account known as a prepaid tuition plan. Those plans allow families to pay tuition today to be used years down the road, after their children enroll in college.

Right now, if you live in Virginia, you could buy a semester at the University of Virginia or another in-state public college for a child under 4 years old for $8,100 for a high school freshman, you could buy a semester at UVA for $7,500. Part of that expenditure would be tax-deductible.

Many states have some version of this plan there’s also a prepaid tuition plan available for private colleges. If your child doesn’t end up going to a participating state school, it’s possible to get a refund and use the money elsewhere.

Resources For Saving For College

Saving for college involves a lot of planning. Even if you have an idea about how much to set aside each month, youre left thinking about other aspects of 529 plans.

How can you leverage each one to save as much as possible? Here are some extra resources and tips:

• How to Open a 529 Plan:Explore everything you need to know to get your 529 plan up and running.
• How Much to Save Per Month for Children Who Arent Newborns?Check out monthly 529 plan recommendation amounts based on your childrens ages.

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What If Youre A Baby Just Entering The Higher Education Game

Hold on to your binkies. When you look 18 years ahead to 2035, colleges could have a tuition of $54,070 per year, and private colleges could be looking at a tuition of $121,078 per year.

Lets do a little quick math here. The projected cost of college in 2035 of $121,078 multiplied by fourthats $484,312 for a four-year degree.

How Much Will College Cost In 18 Years

A look at the cost of a college education over the past six decades shows a clear upward trend. Here are a few examplesusing 2018 dollarsof the average cost of a years tuition at a four-year public institution from the U.S. Department of Education:

• 1968-1969: $10,750
• 2008-2009: $23,536
• 2017-2018: $27,357

Students paying out-of-state tuition tend to pay about double the in-state tuition, and private colleges can be even more expensive. In 2019, a year of tuition at a private institution averages $50,900, or $203,000 for four years. Graduate programs can further increase the total cost of education, with the average two-year masters degree costing between $60,000 and $80,000 according to education company Petersons.

Its important to note that tuition is just one expense among many. For example, industry research indicates that the average student spends $1,250 on textbooks annually. Transportation, room and board, application fees and on-campus service fees can mount quickly.

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How Much Do You Need To Save For College Expenses

This calculator is designed to help you create the most effective funding strategy to cover your expected college costs using a 529 plan. Note that attendance costs and scholarship availability can vary considerably from school to school. The Worlds Simplest College Cost Calculator allows you to estimate costs based on school types .

So Thats It Everyones Screwed And No One Will Be Able To Afford Higher Education

Not at all, theres plenty programs out there to make this less dismal. Numerous lawmakers and politicians are fighting to make college affordable or free. And, several schools are creating programs to help. But one thing is for sure. We have a lot of work to do to make college affordable for the next generation.

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What Is The Forecast For College Cost Increases

Youve seen the numbersa college education is expensive. All those benefits of personal growth, expanded horizons, and increased lifetime earning power come at a price, a price that increases every year. According to the College Boards annual Trends in College Pricing Report, for the 2015/2016 academic year, the average cost of attendance at a four-year public college for in-state students is $24,061, the average cost of attendance at a four-year public college for out-of-state students is $38,544, and the average cost of attendance at a four-year private college is $47,831. Many private colleges cost substantially more.

For decades, college costs have outpaced annual inflation, and this trend is expected to continue. Annual college cost increases in the range of 3% to 6% would be a reasonable projection based on historical averages.

The following table shows what college costs might be in 5 or 10 years based on current costs and a 5% annual college inflation rate.

How To Use A 529 Plan To Reduce College Costs

You might find it difficult to visualize 529 plan savings for the many years to come. After all, college isnt for another few or many years, depending on your childs age.

Earlier on, we demonstrated a couple of examples where 529 savings garnered much more overall savings than a traditional savings account. Well cover a similar example to show the stark difference and superiority of a 529 plan versus traditional savings or personal loans.

Lets use our scenario from above, a $100K household income family saving for a childs in-state public college without assuming any scholarships.

• Household income: $100K
• Monthly contribution: $335

We know that these specs are enough to prepare for your childs college tuition. But how much does the 529 plan save you compared to another loan or traditional savings? Well, these figures would garner you $134,740 in a 529 plan. A traditional savings account would only garner you $70,371. Thats almost double the savings for the 529 plan.

Now, what if you tried to take out a $134,740 loan for your childs education in 2039? Assuming you had decent credit and a substantial down payment, you might get away with a lower interest rate. Lets say you managed to borrow the full amount at 3% interest.

$134,740 = $4,042

Not only will you have to pay the $134,740 back, but youll also tack on an additional $4,042 in interest. Our take? 3% is generous. Lets try with a higher interest rate.

$134,740 = $8,084

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What Happens To Money In 529 If Not Used

If you truly have no other use for your leftover 529 plan savings, you can always take a non-qualified distribution. Your contributions will never be taxed or penalized, since they were made with after-tax dollars. Any earnings on your investments, however, will be subject to income tax as well as a 10% penalty.

Bottom Line: Save As Much As You Can

When it comes down to it, you’ll need to reconcile your numbers with what you can afford. Saving for college is important, but it needs to work with your other priorities, like saving for retirement or building an emergency fund.

Be sure you’re doing all you can, though. Cutting expenses to save an additional $25 a week could have a considerable impact in the long runand make it less likely that you’ll struggle financially when it’s time for college.

Saving more can have a huge impact

This hypothetical illustration assumes an annual 6% return, as well as a weekly deposit for 18 years, for all examples. This illustration does not represent any particular investment nor does it account for inflation. There may be other material differences between investment products that must be considered prior to investing.

Saving more can have a huge impact

This chart shows what your final balance might be if you save different amounts each week. If you save $25 a week for 18 years, you could have a total balance of about $42,600. Increase your contribution to $50 a week over 18 years and your balance could go up to about $85,200. See an even more dramatic spike in your balance when you contribute $75 a week over 18 yearsand boost your savings to about $127,800.

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