The High Cost of College
Going to college is an expensive proposition in the United States. The cost of college education in the United States has been skyrocketing in recent years. According to the College Board, a moderate college budget for an in-state student attending a four-year public college in 2022-2023 averages $27,940! For out-of-state students at public colleges, the price goes up, with the average budget coming to $45,240. Students attending private colleges will have to part with even more, as the average budget is close to $60,000 ($57,570). When factoring in the cost of living expenses and books, the total cost of a college education can easily exceed $100,000.
A recent survey found that, even though there has been a decrease in book prices due to digital offerings, many students still don’t purchase suggested or required textbooks because of their high prices. A study by Bookscouter found 65 percent of students said they had skipped buying a textbook because of the cost. If that is the case, they won’t be getting the education that they have signed up for.
Saving for college means having the money not only to pay for tuition but also for the added costs. Books and living expenses have to be factored in when considering how much you need to save. Along with all of those expenses, inflation must also be taken into account. This makes it more important than ever for families to start saving for college as early as possible.
Martin Walcoe, President & CEO of David Lerner Associates, stresses the importance of starting early and ensuring you are financially prepared for college. He says, “Saving for college is a long-term process, and it’s important to start as soon as possible. By planning ahead and starting early, families can take advantage of the power of compound interest to help grow their savings over time.”
Unfortunately, statistics show that many families are not adequately prepared for the high cost of college. Research by Sallie Mae found that just 42 percent of those that finished a college education had a plan for how to pay for it all before they enrolled. Many folks end up starting a college education but can’t see it through. Nineteen percent of people who didn’t complete their courses said that finances or related difficulties was their reason for leaving.
How to save
One way to start saving for college is to open a 529 savings plan, which allows families to invest money in a tax-advantaged account specifically designed for college savings. 529 plans offer a variety of investment options and typically have no income restrictions or annual contribution limits. The funds can be used for tuition, fees, books, and other qualified expenses at eligible colleges, universities, and vocational schools.
Another option for families is to consider other tax-advantaged savings accounts, such as a Coverdell Education Savings Account or a Uniform Gift to Minors Act (UGMA), or Uniform Transfer to Minors Act (UTMA) account. These accounts offer different tax benefits and investment options, so it’s important to consult with a financial advisor to determine which option is best for your family’s unique needs.
It’s important to remember that saving for college is a long-term process, and it’s never too early to start. By starting early and making regular contributions to a college savings account, families can help ensure that they are financially prepared for the high cost of higher education. By starting early and making regular contributions, families can help ensure that they are financially prepared for the high cost of higher education, and can avoid the long-term impact of student loan debt.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.
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