There are several factors that have been driving price increases, but assuming they will continue at similar rates is likely wrong. What if price increases accelerate? It feels unlikely, but we have a very strong economy right now without additional funding going to schools. States (like NJ) are struggling today, so when things turn and the economics get worse…additional funding cuts would seem likely as costs continue to rise.
NJ has a huge pension problem. The state is underfunded by 3 or 4 years worth of revenue (ie every dollar collected would have to go to the pension to fill the hole). NJ is going to be bankrupt soon, so I would wager the state will do less, not more, to fund public education.
A federal funding policy for state institutions might help resolve this …but who’s going to pay for that?
The title of the thread, “Cost of college education on way to $250,000” makes me think our college-educated kids may think twice about having children.
https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=9300&year1=197805&year2=201905 says that $9,300 in 5/1978 is CPI-inflation-adjusted to $36,924.89. So $42,000 is about a 14% price increase. But a 2019 BMW 320i is a much more capable car in almost every respect (other than fitting into a small parking space) than a 1978 BMW 320i.
Good point privatebanker. If it’s currently 300K for a full pay private nowadays, in 18 years it will cost more than $500,000 for 4 years full pay private in 2037 assuming an inflation rate of only 3% per year between 2019 and 2037.
The bottom line is that parents need to save early and often in a tax advantaged fund (529 College Savings Plan) so that you use compounded interest, reinvested dividends, dollar-cost averaging, and no federal (and most states) tax bill to your advantage. You do this and you will be a lot less concerned about the cost of college in the future.
If you wait until your kids (or grand kids) are in high school, it’s too late and now you are “chasing merit”. Some upfront financial planning will give you many college options 18-21 years later.
"The bottom line is that parents need to save early and often in a tax advantaged fund (529 College Savings Plan) so that you use compounded interest, reinvested dividends, dollar-cost averaging, and no federal (and most states) tax bill to your advantage. "
I agree, but I would add they should significantly increase the annual limits on Coverdell contributions as well. Many states have 529 plans that are limited to ten or so mutual funds with high fees. A Coverdell offers so many more options for investments. it is true that not everyone is a sophisticated investor, but those willing to take the time to become educated and do the research deserve more than what is sometimes a dismal array of funds.
When my kids attended college, the costs (tuition, room and board, and travel) were about $130K for each one at private colleges. Tuition was in the low $20K’s. Now things are really out of whack. Spreading those costs over 7 years (one year overlapped), using both savings and current income, just worked out. That’s because we had decent savings, a good professional [academic] income, and help from the grandparents that covered about 25% of the costs.