College Cost Estimator: How to Calculate the Cost of College
Whether it’s something that will happen in the distant future or next year, the thought of paying for college is intimidating. Higher education seems to get more expensive every year, and tuition rates vary across the board. This can make it difficult to determine how much money to save for the future.
Before you start calculating how much you want to save, let’s take a look at the different college expenses you’ll want to consider when estimating the cost of college.
What College Costs Are You Saving For?
The first thing most people think about when we say “college costs” is tuition. Tuition can range from a few thousand dollars a year at a public in-state school to tens of thousands of dollars each year for some out-of-state and private schools. Costs can also vary when comparing a community college to a four-year school. When your child is young, it can be difficult to predict where they will want to attend college, but it’s something you should be aware of as you plan for the future.
After considering tuition, you’ll also need to think about where they will live. Room and board choices can range from a dorm room on campus to an off-campus apartment. Other college expenses include school fees, books and supplies, a computer, spending money, and other personal expenses.
Another factor to consider is that you don’t necessarily have to save the entire amount of college costs. Many financial experts recommend that parents should plan to save one-third of the cost of college in a college savings account, try to pay one-third while the student is in college, and plan to finance the remainder through financial aid and student loans.
Now that you have a better idea of what you’ll need to save for, we can use the NC 529 College Savings Calculator to estimate how much money you may need when the time comes to send your child off to college.
College Cost Estimator
The college cost estimator begins with specific questions about where you live, how old your child is when you start saving for college, how much money you would like to save each month, and whether they might attend a public, private, in-state, or out-of-state school. Finally, you’ll be asked what percentage of college costs you want to save to meet your goals.
When you view the results of your college cost estimations, you’ll see how your monthly savings can add up over time! You can also adjust the numbers and take into account more children as your family grows. The college cost estimator will show you how much money you need to contribute each month to reach your goals. The tool is easy to use and can save you the stress of figuring out how much money you need to save for college.
Anyone can use our college cost calculator, as this is one of many free resources available through NC 529. Click here to use our college cost estimator.
Choosing a College Savings Fund
Now that you know more about how much you want to save for the future, you should also consider what kind of college savings account you want to open to maximize your college dollars. There are several options available when it comes to starting a college savings fund:
- 529 Savings Plans – Almost every state, including North Carolina, has a tax-advantaged 529 education plan. Earnings from an NC 529 Account grow tax-free, and withdrawals are not taxed if they are used to pay for qualified education expenses. These include K–12 tuition, college expenses, room and board, student loan payments, and more. The NC 529 Plan offers different investment options including age-based tracks and individual options. The person who opens the account (usually a parent) controls how the funds are used.
- Bank Savings Accounts – Most banks will let you open a savings account with a small deposit, and this is an easy way to put money aside for the future. There is no risk of losing your money with a savings account from a federally insured bank. However, savings accounts generally offer low-interest rates, so your money will not grow very quickly.
- Mutual Funds – Mutual funds offer diversification and potential growth. However, you will have to pay annual taxes and any capital gains are taxed when you sell the funds to pay for college. If the mutual fund account is in your child’s name, it could reduce their financial aid eligibility by 20 percent.
- Coverdell Education Savings Accounts (ESAs) – Similar to 529 plans, ESAs grow tax-free and can be used for elementary and secondary education expenses, as well as for college. However, you can’t deposit more than $2,000 per student, per year, into a Coverdell, and when the student turns 18, they take control of the account.
NC 529 Makes Saving for College a Family Goal
There are many factors to keep in mind when determining how much money you want to save for your child’s education. With a tax-advantaged NC 529 Account, you can give your child a big boost toward reaching their educational goals.
With an NC 529 Account, you can set up automatic monthly contributions from your bank account or employer payroll program. Grandparents and other family members also can make monetary contributions for birthdays and special holidays. And as your child gets older, they can make extra contributions to their account if they have a part-time job. Every little bit counts!
Open an account today and start preparing for your child’s future!