«   |   »

Will a year of college cost $100,000 in 18 years?

by Grace

Parents of a newborn today may need to plan for college prices that average over $100,000 a year by the time the child is ready to enroll in 18 years.

What college will cost in 18 years

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 (see chart below). The situation isn’t 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.
(Stephanie Landsman, CNBC.com)

These projections are reasonable if you consider that annual increases in college costs have averaged well over 5% in the last 30 years, almost twice the general inflation rate.  However, these projections are less reliable if we are experiencing a higher education bubble that will soon deflate and prevent prices from continuing to rise at historical rates. 

Here’s one hypothetical savings plan for a newborn’s future college expenses.  It assumes a current annual cost of $40,00.

Future Cost of College and Savings Plan
Estimated 4 Year Cost in 2030 : $414,913.19
Monthly savings required: $821.10
How much will college cost in 18 years and what do you need to save? A 4 year degree is estimated to be priced at $414,913.19 for students enrolling in 2030 if tuition increases 5% per year. Assuming you have no current college savings, monthly deposits of $821.10 into a 529 or other college savings plan earning and after tax or tax exempt return of 7% will be necessary to achieve this balance.

One father of three young children described his challenging predicament this way.

… The kids are the greatest thing that’s ever happened to me, but they are one of the worst things that happened to my retirement plan …

Related:  How Much Will You Need to Send Your Child to College in 2030? (money.usnews.com)

Posted on September 3, 2012 at 5:38 am in higher education bubble, paying for college, rising costs of college, saving for college   |  RSS feed

Tags: ,

8 Comments to “Will a year of college cost $100,000 in 18 years?”

    
  1. gasstationwithoutpumps
    September 3, 2012 at 10:29 am

    There’s also the problem that the current high-price, high-aid model makes the “sticker price” rather meaningless for most students. What you need to look at is the median net price, but that is harder information to get. I believe it has still gone up faster than inflation (at almost the same rate that health care has increased in cost), thanks largely to declining state investment in higher education, but not as fast as this chart shows.

    Like

  2. Grace
    September 3, 2012 at 1:02 pm

    That’s a good point.

    “The net cost after grants and scholarships paid by the typical middle-income family is about 70% of the gross college cost. ”

    But college costs still take a big chunk out of median income.

    The ‘misery factor’ – college costs are taking a bigger bite out of family income

    Like

  3. Grace
    September 4, 2012 at 7:28 pm

    I just find it hard to see how middle- and upper-middle class families will be able to pay $400,000 for their children to attend college, even if they feel the desperation you describe.

    Like

  4. gasstationwithoutpumps
    September 5, 2012 at 12:53 am

    I too find it hard to imagine middle-class families being able to afford college in 18 years, if current trends continue. Of course, state funding has dropped to such a small portion of state university budgets, that even complete loss of it would only double tuition, not raise it as high as simple extrapolation predicts.

    On the other hand, if the Republicans win the election this year, there may not be any middle class left to worry about—there will only be the feudal lords and their serfs.

    Like

  5. Grace
    September 5, 2012 at 6:08 pm

    I don’t believe a Republican win would wipe out the middle class, but I had hoped they would propose a more conservative approach to student loans.

    Like

  6. Amy P
    September 7, 2012 at 3:56 pm

    “I too find it hard to imagine middle-class families being able to afford college in 18 years, if current trends continue.”

    If things can’t continue in the same direction indefinitely, they’ll eventually stop, as a smart guy once said.

    Like

  7. Anonymous
    September 27, 2012 at 3:34 pm

    To be honest, college will not be worth 400-500k. A college degree is often meaningless now without higher education beyond college. You are really looking at a million dollars, if one were to including the additional cost of medical school, vet, business, or law school. Your kid will never be able to pay off a million in loans (in addition to car payments, home mortgage etc…).

    This is your best bet–at a 7% rate of return–that 500k will equal 2million dollars when your child reaches 38 years of age. At a 10% rate of return, which is similar to that of the U.S. stock market over the past 100 years, your child would receive 4 million dollars.

    I went to a top undergrad school, a top medical school, and now earning money. Guess what — I won’t have 2 or 4 million dollars in assets until the age of 50 or 60 (or never).

    Rather than spend a million on a degree, better saving it directly for your child! Believe it or not, I learned more studying on my own than attending college or medical school. With online learning, this becomes even easier. So many great resources.

    Like

  8. Grace
    September 28, 2012 at 12:18 pm

    Alternatively, you could invest some of that $500k into a business for your child to work at, maybe more risky but probably generating a better ROI than something like a degree in gender studies.

    Like