The Average Price of College Tuition
While it is often stated that a college education is priceless, the reality is that costs continue to rise each year.
According to the College Board, most students and their families can expect to pay, on average, up to $1,398 more for this yearâ€™s tuition and fees, compared to last year, depending on the type of college.
The good news is that many sources of financial aid are available to students and their families. For example, during the 2007-08 academic year, more than $143 billion in financial aid was distributed to students in the form of grants from all different sources.1 Moreover, there are plenty of savings vehicles available.
The table below illustrates the trends in college pricing for the 2008-2009 academic year, according to the College Boardâ€™s Trends in College Pricing. When compared with the prior year, the various fees are up at least 5.2%, with a high of 6.4% (tuition and fees only).
The College Board also stated that from 1978-79 to 2008-09 the rate of growth in tuition and fees has been more rapid at public four-year institutions than at private four-year institutions. It has been slowest at public two-year institutions.
These costs might seem somewhat alarming to most people (especially for those parents who have put off saving and planning for their childrenâ€™s college). But about 56% of students who are enrolled at four-year colleges or universities attend institutions that charge tuition and fees of less than $9,000 per year, and 38% of full-time students who are enrolled in public four-year colleges and universities attend institutions that charge tuition and fees between $3,000 and $6,000.
While private four-year institutions have a much wider range of tuition and fee charges, only about 8% of all students attended colleges with tuition and fees totaling $33,000 or higher per year.
However, it would be wise for parents to start saving for college as soon as possible and to assume their children will attend a private four-year institution. If they receive grants and/or scholarships or decide to opt for a more-affordable option, think of all the fun things the excess cash could be used for!
There is an array of college-savings options availableÂ â€“ many that offer tax-deferred growth and tax-free withdrawals (when used for qualified higher-education expenses). Some of the more popular plans include 529 plans and Coverdell Education Savings Accounts (ESA). There are contribution limits to the various plans, and plenty from which to choose, so it would be wise to consult with your financial advisor to see what is right for you.
As with any goal, whether you are saving for retirement or a vacation home, the keys are to start saving early â€” and to save often. While itâ€™s easy to procrastinate when it comes to initiating a long-term investment plan, the sooner you begin, the more likely it is the plan will succeed. By starting early, and thereby taking advantage of the power of compounding, time can be your best friend.
1College Boardâ€™s Trends in Student Aid, 2008.
Source: © 2012 Morningstar. All rights reserved. Used with permission.
Graphic Source: College Boardâ€™s Trends in College Pricing, 2008.