The cost of college depends on a variety of factors, including whether the school is public or private. While public colleges receive funding from their states, private colleges rely heavily on donations and tuition. So tuition at private schools tends to be higher. In 2014-2015, the average cost of tuition and fees for in-state students at a public four-year college was $9,139, according to the College Board; a private four-year college cost $31,231. You can use those numbers as a benchmark to estimate your tuition bill. Just keep in mind that costs are likely to be higher in 10 or 12 years.
Look for ways to trim your budget so you can free up money to save. You can also ask friends and family to contribute to your child’s college savings in lieu of birthday gifts. Students might consider a two-year community college, where they can earn credits at a fraction of the cost of a four-year program. You can use that time to save, and your student can transfer those credits to a four-year school later on.
Families pay for college from a variety of sources. In 2014, just 30 percent of tuition payments came from personal income and savings, Sallie Mae notes. Options, including scholarships, grants and loans, help pay the rest. A variety of government and private sources, including the schools themselves, offer these.
Tip: The federal government awards about $150 billion in grants, work-study, low-interest loans and other financial aid each year. To tap into that aid, you must fill out a FAFSA—the Free Application for Federal Student Aid.
A 529 is a tax-advantaged plan designed to make it easier to put away money for college. The plans generally offer a variety of investment options. In addition to offering the potential for tax-free growth, 529 plans let you make tax-free distributions for qualified higher education expenses like tuition, room and board, and books or supplies. Keep in mind that, as with any investment, a 529 can lose money.
Tip: Some states offer tax breaks for in-state plans, so check with your state to see whether a certain plan qualifies.
The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.