College savings is a race against a price that rises while you save. Today’s tuition is not the bill. The bill is that tuition inflated through the year school starts, and then inflated again for each year after that. The monthly amount that covers it is usually higher than a back-of-the-envelope guess.
Inflate every year, not just the first
College costs have often risen faster than general prices. The inflation rate you enter compounds from today through the last year of school. The first year in the future is not the same number as the fourth, because the fourth has had more time to rise.
Enter the cost you expect to pay, including housing if you will pay it. Use a net price after aid if you have a grounded estimate. The sticker price is the conservative input when aid is unknown. Scholarships, grants, and a student’s earnings are not assumed unless you lower the annual cost.
The savings have to arrive before the bill
Current savings and new monthly deposits compound until school starts. The required deposit is the amount that lands on the inflated total. Your actual deposit produces the projected balance beside it. The gap is the future dollars still uncovered.
The tool assumes the whole sum is available when school starts. It does not keep earning while you pay tuition. That makes the target a little higher than a plan that invests the leftover during the college years. If school is only a few years away, use a savings return, not a stock-market return.
A 529 changes the taxes, not the need
The growth math is the same inside or outside a 529. A 529 can make qualified growth tax-free, which this pre-tax projection does not add on top. A state tax benefit for contributions is also left out. Both can close part of a gap. They do not remove the need to save.
Starting earlier does more than picking a slightly higher return. If the gap is large and the start date is close, the monthly number will jump. At that point, cash flow during school and a lower net price matter as much as new savings.
How to use the college savings calculator
The future cost inflates today’s sticker for every year of school, including the years you are still waiting. The monthly figure is the savings rate that reaches that total by the first year. If your projected savings are short, the gap is the future dollars still uncovered. The tool assumes the whole sum is available when school starts. It does not keep earning while you pay tuition.
- Enter today’s annual cost for the kind of school you have in mind, including housing if you will pay it.
- Enter what you have saved, what you add each month, and how many years you have.
- Set college inflation and the return on the savings.
- Compare the monthly amount that would cover the future bill with what you save now.
How the math works
Inflating the sticker
College costs have often risen faster than general inflation. The inflation rate you enter compounds from today through the last year of school. Year one in the future is not the same number as year four.
The savings path
Current savings and new monthly deposits compound monthly until school starts. The required deposit is the amount that lands exactly on the inflated total. Your actual deposit produces the projected balance next to it.
What the gap means
A gap can be closed by saving more, starting sooner, using a lower-cost school, or planning on income during the college years. The calculator does not assume scholarships, grants, or a student’s summer earnings unless you lower the annual cost.
$28,000 a year, 12 years from now
The defaults save $15,000 already, add $400 a month, plan on 4 years of school, inflate costs 4% a year, and earn 6% on the savings.
The four years cost about $190,000 in future dollars. The first year alone is about $45,000. Covering the total would take about $759 a month. At $400 a month the savings grow to about $115,000, about $76,000 short.
Terms worth knowing
- Sticker price
- The published annual cost before aid. You can enter a net cost instead if you have a better estimate.
- College inflation
- How fast that annual cost rises. It can be higher than everyday inflation.
- 529 plan
- A tax-advantaged account used for education. This calculator models the savings math, not the tax rules.
- Gap
- Future cost minus the balance your current savings rate is projected to reach.
What to do with the number
Enter the cost you expect to pay, not the most expensive school in the country, unless that is the real plan.
Starting earlier does more than picking a slightly higher return.
Aid, a 529 state tax benefit, and grandparents’ gifts can close a gap this tool will not invent for you.
If college is only a few years away, use a savings return, not a stock-market return.
Questions people ask
What this leaves out
Costs rise at a constant annual rate through the last year of school.
Savings compound monthly until the first year and are then available in full.
The balance does not keep earning while tuition is being paid.
Scholarships, grants, loans, and tax benefits are not included.
These figures are estimates to help you understand the tradeoff. They are not tax, legal, insurance, or investment advice. A fiduciary can look at the same numbers in the context of the rest of your plan.