How to Plan for College Costs
College tuition has historically increased faster than general inflation — typically 3–5% per year. A degree costing $35,000 annually today could cost over $57,000 per year in a decade. Starting to save early and understanding the true future cost is the most powerful step a parent or student can take.
Our College Cost Calculator projects the total future cost of attendance, estimates how much your existing savings will grow, and calculates the monthly contribution needed to close the gap — accounting for investment returns and tax drag on taxable accounts.
The Core Formula
Future annual college cost is projected using compound inflation:
Future Cost (Year 1) = Today's Cost × (1 + inflation rate)^years_until_start
Your savings goal is the portion of total future costs you plan to fund from savings. The monthly savings required to reach that goal is calculated as:
Monthly PMT = FV × r / [(1+r)^n − 1]
Where FV is the savings target (minus projected growth of existing savings), r is the after-tax monthly return, and n is months until college starts.
Savings Strategies
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529 Plan
Tax-advantaged account where earnings grow tax-free when used for qualified education expenses. Set tax rate to 0% in the calculator.
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Start Early
Starting 15 years before college vs 5 years can reduce required monthly savings by over 60% due to compound growth.
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Invest Aggressively Early
With 10+ years until college, a stock-heavy portfolio (7–9% returns) significantly reduces the monthly savings burden.
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Partial Funding
Many families plan to fund 50–70% from savings and use loans, grants, or work-study for the remainder. Adjust the savings % slider accordingly.
Frequently Asked Questions
What is included in college cost?
Total cost of attendance typically includes tuition, fees, room and board, books, supplies, transportation, and personal expenses. The annual figure you enter should represent all costs, not just tuition.
Should I set tax rate to 0%?
If you're saving in a 529 plan or Coverdell ESA, earnings are tax-free for qualified education expenses — set tax rate to 0%. For taxable brokerage accounts, enter your marginal tax rate on investment returns (typically 15–20% for long-term capital gains).
What if I can't save the full required monthly amount?
That's fine. Reduce the "% of costs from savings" slider to reflect a smaller savings goal. The remaining portion can come from financial aid, scholarships, student loans, or part-time work. The calculator will show your revised monthly target.
How realistic is a 6% investment return?
A diversified stock index fund has historically returned around 7–10% annually before inflation. After inflation and taxes, 4–6% is a conservative and commonly-used planning figure. The calculator lets you adjust this based on your comfort level.
