College Cost Calculator

What Is a College Cost Calculator?

A college cost calculator estimates how much college may cost in the future and how much you may need to save to cover those expenses. It considers today’s annual college cost, expected cost increases, years until college starts, attendance duration, current savings, investment returns, and taxes.

This is especially useful for answering a common planning question: how much will college cost by the time a student enrolls?

Unlike a basic college expenses calculator that looks only at current costs, this calculator projects expenses into the future. It also estimates a savings target and the monthly amount needed to work toward that goal.

The results are estimates, not guaranteed future costs. Actual expenses can vary based on the college, degree program, housing, financial aid, scholarships, and other factors.

How to Use the College Cost Calculator

Enter your college and savings assumptions to create a personalized college cost estimate.

1. Select the College Type

Choose the type of college you want to estimate. The calculator can use the associated annual cost as a starting point for your projection.

2. Enter Today’s Annual College Cost

Enter the current estimated annual cost of attending college. This is the starting amount used to project future expenses.

For a more realistic estimate, consider the total cost of attendance rather than tuition alone.

3. Enter the Cost Increase Rate

Enter the percentage by which you expect college costs to increase each year.

For example, entering 5% means the calculator assumes college expenses will rise by 5% annually.

4. Enter the Attendance Duration

Enter how many years the student expects to attend college. For example, you might enter 4 years for a typical four-year undergraduate program.

5. Enter When College Starts

Enter the number of years until the student begins college.

This is important because a longer period gives college costs more time to increase before the first year begins.

6. Choose the Percent From Savings

Enter the percentage of total college expenses you want to pay from savings.

For example, if you select 35%, the calculator estimates how much you need to save to cover 35% of projected costs rather than the entire amount.

7. Enter Current Savings

Add the amount you have already saved for college. Existing savings can reduce the additional amount you need to contribute.

8. Enter the Return Rate

Enter the expected annual return on your college savings or investments.

Remember that investment returns can vary and are not guaranteed.

9. Enter the Tax Rate

Enter the applicable tax rate. The calculator uses this information when determining the after-tax return used in the savings calculation.

Tax treatment can vary depending on the type of savings or investment account.

10. Calculate Your College Costs

Click Calculate to see your projected college expenses, savings targets, monthly savings estimates, freshman-year amounts, and year-by-year cost projection.

How Does the College Cost Calculator Work?

The future college cost calculator starts with today’s annual college cost and projects it forward using the cost increase rate.

A basic future cost calculation can be represented as:

$FV = PV(1+g)^n$

Where:

• (FV) = future annual college cost

• (PV) = today’s annual college cost

• (g) = annual college cost increase rate

• (n) = number of years into the future

For example, suppose college currently costs $30,000 per year, college starts in 3 years, and you assume costs increase by 5% annually.

The estimated first-year cost is:

$FV = 30,000(1+0.05)^3$

$FV \approx 34,729$

College costs may continue increasing during the student's attendance. Therefore, the calculator projects each college year separately and adds those annual amounts to estimate the cumulative cost.

After-Tax Return

When taxes apply to investment earnings, the effective return available for college savings may be lower than the stated return.

A simplified after-tax return can be expressed as:

$r_{after-tax}=r(1-t)$

Where:

• (r) = expected return rate

• (t) = tax rate

• $(r_{after-tax})$ = effective return after taxes

For example, with a 5% return rate and 25% tax rate:

$5$
So the effective after-tax return is 3.75%.

The actual tax treatment of college savings depends on the account and investment type, so this assumption may not apply equally to every savings strategy.

College Cost Projection

The college cost estimator also shows how expenses may change throughout the student's attendance.

Annual Cost

Annual cost is the projected expense for one specific college year.

For example, if the estimated costs were $35,000 in Year 1 and $36,750 in Year 2, those amounts represent the individual annual costs.

Cumulative Cost

Cumulative cost is the running total of all projected annual expenses up to that point.

If:

• Year 1 costs $35,000

• Year 2 costs $36,750

the cumulative cost after Year 2 would be:

$35,000+36,750=71,750$

The calculator's projection chart makes it easier to compare annual and cumulative college costs over time.

The year-by-year table provides the exact projected annual cost and cumulative cost for each year of attendance.

What Expenses Should You Include in College Costs?

Tuition is only one part of the total cost of attending college. For a more useful estimate, consider using the institution's published cost of attendance when available.

Depending on the student and college, expenses can include:

• Tuition and mandatory fees

• Housing or room expenses

• Meal plans and food

• Books and course materials

• Supplies and equipment

• Transportation

• Personal expenses

The actual cost can vary considerably between public and private colleges, in-state and out-of-state enrollment, living arrangements, programs, and individual spending habits.

Why Future College Costs Can Be Higher Than Today's Costs

College planning often begins years before enrollment. During that period, tuition and other education expenses can change.

For example, assume today's annual college cost is $30,000 and it increases by 5% each year.

After 10 years:

$30,000(1.05)^{10}\approx48,867$

Under that assumption, an annual expense of $30,000 today would become approximately $48,867 in 10 years.

This is why using today's price alone can underestimate a future college savings goal.

The percentage you enter is an assumption, however. Actual future college costs may increase faster or slower.

How to Improve Your College Cost Estimate

Start with the most realistic annual cost available. If you have a particular institution in mind, its published cost of attendance can provide a better starting point than tuition alone.

Review your estimate periodically because college prices, savings balances, expected returns, and enrollment plans can change. You can also test different cost increase and return rates to understand how your savings target changes under different assumptions.

Avoid assuming unusually high investment returns simply to reduce the estimated monthly savings amount. Investment performance is uncertain, and actual returns can be higher or lower than your assumption.

Most importantly, consider how much of the cost you actually intend to cover from savings. Families expecting scholarships, grants, current income, or other funding may choose a percentage below 100%.

Helpful Resources

• College Cost of Attendance

• Compare College Tuition and Net Prices

• College Net Price After Grants and Scholarships

Pro Tips

• Revisit assumptions yearly, as both cost growth and returns change.

• Seek scholarships, grants, and financial aid to reduce required savings.

• Use the 0% tax rate for qualified 529 plan growth.