Estimating College Funds
This calculator can estimate the future cost of college as well as a potential funding approach to pay for school. The calculator needs a total of six inputs, including:
- The cost of college today, which is highly dependent on the college or university selected to model
- The years until matriculation, which is the number of years until the student enters college
- An estimate of the annual increase in college costs
- The amount of money in a college fund, if any
- An estimate of the annual rate of return on the money placed in the college fund
The calculator then provides the user with three sets of outputs, including:
- An estimate of the cost of college in each of the four years the student attends
- The total cost of all four years at college or university
- An estimate of the money in the college fund at the end of each of the four years of college. Ideally, the value found in Year 4 would be close to zero
Starting a College Fund
One of the greatest gifts a parent can give a child is to pay for their college education. Waiting to start a fund is like kicking the can down the road. Eventually, the day will come to start saving. Setting money aside for years takes discipline and commitment. But it’s easier to spread that pain over the course of eighteen to twenty years rather than four or five.
Users of this calculator might look at the cost of college estimates in disbelief. Speaking firsthand, they can, and research indicates the cost of a public education increased roughly threefold over the last 20 years while a private education nearly doubled. In fact, according to information published by the National Center for Education Statistics (NCES) from the year 2000 through 2020, the average cost of a four-year public institution rose by around 9.0% per year, while tuition and fees at a four-year private institution rose by 6.2% per year over that same timeframe.
Using our College Funding Calculator
We just mentioned some information you might consider using as an input for College Cost Increase per Year. Today’s Cost of College should be easy to research since all colleges and universities reveal these costs right on their websites. So, if you know the schools you might be targeting, pay their site a visit. The same goes for Funds in College Account. If money is already earmarked for higher education, just enter the value of that account.
Years until Matriculation is a fancy way of saying years until the student enrolls in college. The Annual Return on Funds is a best guess at what the funds in the college account might be able to earn. Finally, the Annual Contribution value is the most important variable entered by a user. By varying this value, a user can see if there will be a shortfall or surplus of college funds after four years. While it might be hard to believe this much money needs to be set aside to pay for a child’s college education, just look at the total college cost estimate.
It’s no doubt paying for college can be a financial burden but obtaining a college degree can also pave the way for a higher paying job and standard of living in the future.