Are You Saving Enough For College? - Nancy McKenna ––

Are You Saving Enough For College?

Are You Saving Enough

Are you saving enough for college?   How do you know?  Do you have a budget for college?   How did you come up with the budget?  More importantly - is the budget realistic?  

Let's take a look:

Step 1:

The first step you can take is to get a high-level overview of college costs.   This isn't entirely accurate, of course, but it will give you an idea.  Let's look at a True Cost Calculator to see what colleges will cost.  We'll do this based on your family's income.

As a for instance, let's look at two schools in New Jersey, where I live.  We'll look for my son Tommy, who is a high school junior.

The College of New Jersey is a great public school.  It's competitive to get into, but has an astonishing 94% retention rate, and 4 year graduation rate of  72%. 

The screenshot below is for a family making more than $110k per year.  This suggests that we'd need $29k per year.  My budget is $30k per year, so this looks like it is within budget.  

Private Co​llege

Now let's look at a private school in New Jersey.  The results for Princeton may surprise you.

Did you know that Princeton and other Ivy league schools offer very low tuition? Their view is that if you can get to the school, they will make it affordable.   Does that surprise you?  Of course, getting accepted is the tricky part.

Private College

Let's look at another private school in New Jersey. One that more people can actually get into.    Here is a result for Monmouth University.  $37k per year.  Over budget.  

Let's look at these schools in my college database to see how they compare:

Monmouth appears to be the least desirable, based on the stats we see.  What's worth noting:

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    Monmouth's acceptance rates are 74% - quite high
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    The College of New Jersey has a 94% retention rate - incredibly high for a public school!  This means 94% of the kids come back for year 2.  No lost credits for transfers.
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    The College of New Jersey also has a 72% 4 year graduation rate.  Screamingly high for a public school
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    Princeton only accepts 6% of the students that apply.  Blimey.

So, this exercise was to show you about what colleges will cost.  Understanding what colleges cost is the best way to come up with an accurate budget.  

Net Price Calculator

To get the most accurate understanding of what you will be expected to pay, you will need to go to the college's website to use their NPC.   

Every college's calculator may ask for different amounts of information.  Understand that the more information they ask for, the more accurate your result will be.  This NPC checklist will help you gather the documents you'll need. 

How much have you saved?

Are you on track to pay your budgeted amount?  How much have you saved?   How long do you have until your children go to college?  

I suggest you go to your 529 Plan and plug the numbers into their calculator to see if you're really on track. 

The 529 plans I have for my kids are with T.Rowe Price.  I went into the calculator recently to see if I am on track.

The image on the left shows the following inputs:

  • my son is 16
  • I have a $30k per year college budget
  • I have $35k saved
  • I am saving $500 per month
  • I will add an additional $10k per year

The image on the right shows the outputs:

  • If  my inputs stay on track, I'll have $147k saved
  • college will cost $147k
  • I will be on track!

If it appears you're not on track:

It may be time to beef up the college savings.  How much can you increase monthly savings by?  Make it hurt.  What can you give up and put toward savings?   Make this a priority so your kids won't have to borrow.   Believe me, they will thank you!  

About the Author Nancy McKenna

I'm a personal finance geek. A real estate investor. An accountant, a single mother. And I'm going to get my kids through college without student debt! Will you?

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