MaryLucy Bergeron, CFP®
College Might Feel Far Off, But the Clock is Ticking
College might seem like a distant expense—especially when your child is still in diapers or grade school—but in financial planning years, it's closer than you think. And here’s the truth: The earlier you start saving, the more flexibility and breathing room you'll give your future self. Whether you’re a first-time parent or already juggling multiple education goals, this post lays the groundwork for building a smart, strategic college plan.
In this first part of our College Planning series, we’ll walk through what college costs today and what it might look like in the future, why starting early beats trying to catch up later, some of the most common mistakes families make early on, and how financial aid and scholarships fit into the bigger picture.
What’s the Real Cost of College?
The cost of college has been rising fast. Today, families are typically looking at around $24,920 per year for in-state public universities, $44,090 for out-of-state public options, and closer to $58,600 per year for private schools. When you add in room and board, travel, books, and those inevitable surprise expenses, the total price tag often falls somewhere between $100,000 and $300,000 for a four-year degree. (Source: JP Morgan: College Planning Essentials)
Now fast forward 10 to 15 years. If your child is still in elementary school or younger, that number could balloon significantly, especially with annual average tuition increases hovering around 5.6%. (Source: JP Morgan: College Planning Essentials)
Start Early, Borrow Less Later
Saving for college doesn’t have to start with massive contributions. Starting early—even with modest monthly amounts—can make a big difference over time thanks to the power of compound growth. The earlier you begin, the more time your money has to grow and the less you may need to borrow later. With college costs continuing to rise, getting a head start could mean the difference between manageable savings and a long stretch of student loan payments.
Suppose you start saving $200 a month in a tax-free 529 plan when your child is born. Over 18 years, assuming a 6% average annual return, your savings could grow to approximately $74,174—that’s nearly $31,000 more than you contributed, and money you wouldn’t need to borrow.
But if instead you borrowed that same $74,174 at a 6% interest rate, you could end up paying about $823 a month for 10 years, with a total repayment of $98,817. That’s over $55,000 more than if you had saved steadily from the start.
The bottom line? The earlier you start, the less you may have to save later. Small, consistent contributions can really add up when given enough time.
Sources:
bankrate.com/calculators/mortgages/loan-calculator.aspx
investor.gov/tools/calculators/compound-interest-calculator
Common Mistakes Families Make Early On
One of the most common mistakes most families make is waiting too long to start. It’s easy to put it off, especially with competing priorities like daycare costs, buying a home, and just everyday life. But every year you delay means you’ll likely need to save more aggressively down the line.
Choosing the right type of account can make a big difference when saving for your child’s future. While UTMA or custodial accounts might seem like a simple option, parent-owned accounts like 529 plans often offer more favorable treatment when it comes to financial aid. By being strategic with your savings, you can help maximize both growth potential and financial aid eligibility.
Then there’s the assumption that scholarships will cover everything. While it’s true that some students do receive scholarships, they’re often partial and competitive. Relying on them as the main strategy can be risky.
Finally, choosing the wrong savings vehicle altogether. Skipping 529 plans or other tax-advantaged options can mean missing out on tax-free growth and potential state tax deductions. Some families default to regular savings or investment accounts that don’t offer the same benefits. We’ll go deeper into choosing the right account in Part 2 of this series.
It’s Not Just About Saving—Don’t Forget Financial Aid & Scholarships
While building a savings plan is essential, it’s just one piece of the puzzle. Understanding how financial aid and scholarships work can help you make smarter decisions right from the beginning.
Let’s start with the FAFSA form, or Free Application for Federal Student Aid. This form determines your family’s Expected Family Contribution (EFC), which plays a key role in your child’s eligibility for need-based aid. Here’s where it gets interesting: The way you save—and who owns the account—can affect how much aid your child receives. For example, a 529 plan owned by a parent is counted more favorably than one owned by the child.
Even if you think you won’t qualify for aid, filling out the FAFSA is still worthwhile. Many schools and private scholarships require it, and you never know what options might become available.
Scholarships are great if your child gets them, but they shouldn’t be the core of your plan. Scholarships are competitive, unpredictable, and often don’t cover full tuition. That’s why we encourage families to save as if their child won’t receive one. If they do, fantastic—you’ve now got more flexibility and can even repurpose funds for graduate school or transfer them to another child.
Up Next in Part 2: What Accounts to Use & How to Use Them
In our next post, we’ll dive into the most common tools for saving for college. From 529 plans to UTMAs to Roth IRAs, we’ll explore the pros, cons, and best-fit scenarios for each. There’s no one-size-fits-all approach, but there are some clear dos and don’ts to help you maximize your efforts and avoid tax and financial aid pitfalls.
Up Next in Part 3: Spending Education Funds Wisely
You’ve saved intentionally—now it’s time to use those dollars strategically. In the final part of our series, we’ll walk through how to make the most of your education savings. We’ll cover what qualifies as an eligible expense, how to coordinate tax credits with withdrawals, and smart strategies to avoid penalties. We’ll also share what to do with leftover 529 funds and how to stay flexible when plans change.
Stay tuned for tips that help you spend confidently and make every dollar count.
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