Update on College Savings

I was looking through our financial information this week and noticed that our college account for our 7 year old daughter is approaching $10,000.  While that seemed like a decent balance for a 7 year old, I started looking at how much we’re really going to need when our daughter finishes high school.  Unfortunately, it’s clear we aren’t saving enough.  A conservative estimate is that it will cost somewhere around $140,000 for an “in state” public college.  Whether that’s enough or not, if we could reach that balance by the time our daughter is ready for college, it will drastically soften the blow of college expenses.

We’ve been contributing $250 a month for the last few years and I thought that seemed like a reasonable monthly contribution.  It’s not.  I went to the Saving for College website and used their calculator to determine how much more we need to save on a monthly basis to cover 100% of her college expenses.  It turns out that we are underinvesting by about $200 a month.  That’s not necessarily a bad thing if we expect to be able to fund part of her college out of our monthly income at the time she’s in college, or if we expect our daughter to get a job on campus to help offset the expenses.  All that being said, I’ve decided to increase our contributions to $400 per month.  While that doesn’t get us to 100% funding, it gets us a lot closer than the path that we are currently on.

I have read a few different articles about a college “bubble”.  The theory goes that college kept getting more expensive because people were able to obtain larger and larger amounts of credit to pay for it.  Now that credit has dried up, I wonder if we’ll see college costs stabilize a bit.  Frankly, it doesn’t make a ton of sense to me.  Maybe we should start a movement to take education back to a more sparse setting.  Sure, we’ll still need computers in the schools etc, but maybe we don’t need the elaborate settings to learn in.  Basically, I think we need to take a hard look at what drives education expenses and drastically reform it.  Education should be structured to provide as much learning for as low a price as possible, at least at the state level.  For the wealthier among us, they could choose to attend the much more expensive private colleges.

Anyway, enough of the opinions.  What is clear to me is that if my daughter has any hope of attending college without loading up on debt, I need to keep saving at as high a rate as possible.