Most Americans have some vague sense that they ought to be saving more to send their children to college. At least in part because of the way financial aid works, however, it’s hard to know exactly, or even vaguely, how much to save.
Now there are answers. According to a piece by Jennifer Saranow Schultz in the New York Times:
Today, Fidelity Investments released what it is calling the first industry guidelines for how much parents should save in a 529 college savings plan. It’s offering up both annual and monthly suggestions based on income, assuming the family doesn’t want to take out any loans.
Taking into account the expected increase in the price of college (5.4 percent a year) and expected scholarships and grants, Fidelity estimated how much families should save for college over the next 18 years.
According to Fidelity, a family making $55,000 would need to save $48,000 to cover the qualified expenses of a public university and $107,000 to cover such costs for a private one. This translates into saving $160 a month for a public college and $410 a month for a private one.
A family that earned $75,000 a year should save $190 a month for a public university and $410 a month for a private school.
A family that earned $100,000 a year should save $250 a month, for a public university and $460 a month to send a child to a private school.
Families that earn about $150,000 a year ought to save $250 monthly if they expect to send a child to a public university and $500 a month per child (about 4 percent of total income) for a private education.
Incidentally, given the assumed 5.4 percent annual college cost increase, in 18 years one year at a private college will cost (tuition plus room and board) an average $91,744.
View the Fidelity guide here.