What college really costs - and how much should you save?

There's no getting around it. College is expensive. It may, however, cost less than you think.

While the price listed on a school's website may be jaw-dropping, remember the published price is like the sticker price on a car. It doesn't always reflect the true cost, which is referred to as the net price.

The net price is the sticker price minus any scholarships, need-based grants, or other types of financial aid a student receives and doesn't have to repay. When thinking about how much you may have to pay for your child's college education, try to focus on the net price.

Here are the average costs for 2018–2019, including tuition, fees, and room and board:

  Public college, in-state student
Private college
Average sticker price $21,370 $48,510
Average net price $14,880 $27,290

Source: Average price and average net price from The College Board, "Trends in College Pricing 2018."


How much to save


College costs can be daunting for a lot of people. One strategy that can make it less overwhelming is to set a goal for saving. Perhaps it's saving a percentage of the 4-year cost—maybe a third, or 33%—with the expectation that a combination of financial aid, income during the college years, and loans will cover the remainder.

So let's look at an example using that as the savings goal. We'll assume you have a 3-year-old daughter and haven't started saving for her college education. You expect she'll begin at age 18, so we'll estimate the cost of college 15 years from now.

Projected net college prices for a 3-year-old

  Public college, in-state student
Private college
Average 4-year cost $133,330 $244,531
33% saving goal $43,999 $80,695

In this example, you'd be able to reach the public school goal by saving $129 a month. For the private college goal, you'd have to save $237 a month.

Source: Calculated using Vanguard's college savings planner. The average 4-year cost of college was calculated by using the current net prices of $14,880 for a public college and $27,290 for a private college, and a cost increase of 5% annually. The monthly savings amounts are based on a 5% average rate of return on your savings. This hypothetical example doesn't represent the return on any particular investment and the rate is not guaranteed.


Save what you can

If saving over $100 a month isn’t realistic, save what you can. And remember—every dollar you can save is one less your child will potentially have to borrow!

The information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.

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