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A college education is generally the largest purchase a family will make, aside from buying a home. And college is expensive. In 2017, for example, the average one-year cost of tuition and fees, and room and board, at four-year public colleges in the U.S. was $19,4871. If this annual figure is multiplied for four years of study, the total reaches $77,948. And that’s not everything, these figures do not include books, transportation to and from school, other incidentals, and continuing cost inflation.Not only is college expensive today, the cost of a college education keeps going up as each year passes. Even worse, higher education costs have been increasing at a rate faster than inflation. The average annual tuition and required fees charged at four-year public colleges in the U.S. in 1985 was $1,228. By 2017 that figure had grown to $8,8041, a compound annual growth rate of 6.35%. In comparison, inflation, as measured by the Consumer Price Index (CPI-W)2, increased from 1985 to 2017 by an annual compound rate of only 2.55%. Many expect that college costs will continue to outpace inflation.
Start Planning Early:
With college costs high and rising, a family needs to begin the college planning process as early as possible. Taking key steps now makes it easier to reach the goal.
1Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, Table 330.10, Average undergraduate tuition and fees and room and board rates charged for full-time students in degree granting postsecondary institutions, by level and control of institution: 1963-64 through 2016-2017. Measured in current dollars.
2The CPI is the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W
3Federal law does not allow deductions for contributions to 529 plans, although growth inside a plan is tax deferred and qualified distributions are tax-exempt. The earnings portion of a non-qualified distribution is subject to federal income tax, including a 10% tax penalty. State or local tax law, however, can very widely. 529 plans involve investments risk, including possible loss of funds, and there is no guarantee a college-funding goal will be met. The fees, expenses, and features of 529 plans vary from state to state.
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