How much does college actually cost in 2025-26?
The College Board's Trends in College Pricing and Student Aid 2025 provides the most authoritative annual snapshot of college costs. For the 2025-26 academic year, the average full-time undergraduate budget (tuition and fees, housing and food, books and supplies, transportation and other personal expenses) breaks down as follows:
| School Type | Average Annual Cost | 4-Year Total |
|---|---|---|
| Public four-year, in-state | $30,990 | $123,960 |
| Public four-year, out-of-state | $50,920 | $203,680 |
| Private nonprofit four-year | $65,470 | $261,880 |
| Public two-year (in-district) | $21,320 | $42,640 (2-yr) |
Important context: these are sticker prices. At private nonprofit four-year colleges in 2025-26, the average full-time student's tuition, fees, housing and food come to about $32,830 after grant aid, against $60,920 published, plus about $4,550 for books, transportation and other costs (College Board, 2025). However, grant aid is not guaranteed — savings plans should target the full sticker price to avoid an unpleasant surprise.
The college inflation problem: why your savings target is higher than you think
College costs have risen at an average rate of 4-6% per year over the past two decades — significantly outpacing general inflation of 2-3%. At 5% annual college inflation, a public in-state school with a $30,990 budget today (College Board, 2025-26) will cost approximately:
- In 5 years: $39,600/yr ($158,000 for 4 years)
- In 10 years: $50,500/yr ($202,000 for 4 years)
- In 18 years: $74,600/yr ($298,000 for 4 years)
This compounding effect is why parents of young children face a dramatically higher savings target than the current sticker price suggests. The 5% college inflation rate used in this calculator reflects the historical average. You can adjust it if you believe costs will rise faster or slower.
What is a 529 plan and how does it work?
A 529 plan is a state-sponsored, tax-advantaged investment account designed specifically for education expenses. Named after Section 529 of the Internal Revenue Code, these plans are operated by individual states but available to residents of any state.
Key tax benefits
- Tax-free growth: Investments grow federal income tax-free. You pay no capital gains on appreciation inside the account.
- Tax-free withdrawals for qualified education expenses — tuition, fees, room and board, books, computers, and required supplies.
- State tax deductions: some states also give a deduction or credit for contributions to a 529 plan. Rules and amounts vary by state, and this calculator does not estimate them.
Qualified expenses
529 funds can be used for:
- College tuition and fees at any accredited institution worldwide
- Room and board (on or off campus, up to the school's cost-of-attendance allowance)
- Books, supplies, and computers required for enrollment
- K-12 tuition, curriculum, tutoring, test fees and some therapies (up to $20,000 per year from 2026, $10,000 before — federal tax-free, state rules vary)
- Student loan repayment (up to $10,000 lifetime for each borrower: the beneficiary and each of their siblings; SECURE Act of 2019, Pub. L. 116-94, 26 U.S.C. 529(c)(9))
- Apprenticeship programs registered with the U.S. Department of Labor
What if my child does not go to college?
The biggest historic objection to 529 plans — "what if my kid skips college?" — has been substantially resolved by SECURE 2.0 (signed into law December 2022):
- Change the beneficiary to any qualifying family member: sibling, first cousin, parent, spouse, or yourself.
- Roth IRA rollover (2024 and later): Unused 529 funds can be rolled into a Roth IRA for the beneficiary — up to a $35,000 lifetime limit — if the account has been open at least 15 years. This is a game-changer: overfunding a 529 now creates a Roth head start for your child.
- Non-qualified withdrawals are subject to income tax plus a 10% penalty on earnings only (not contributions). In many scenarios, the tax-free growth still outweighs this penalty.
Other college savings vehicles
A 529 plan is the right choice for most families, but it is worth understanding the alternatives:
- Coverdell ESA: Annual contribution limit of $2,000 per beneficiary. More investment flexibility (can hold individual stocks). Funds must be used by age 30 or transferred. The $2,000 cap limits usefulness for most families.
- UGMA/UTMA custodial accounts: No education restriction — money can be used for anything. However, the assets legally belong to the child at age 18-21, and custodial accounts are assessed at 20% for FAFSA purposes vs. 5.64% for parent-owned 529s. The financial aid impact is significant.
- Taxable brokerage accounts: Maximum flexibility, no restrictions, no special tax treatment. Best used after maximizing 529 contributions or for parents unsure about college attendance.
- Roth IRA (for parents): Contributions (not earnings) can be withdrawn tax-free and penalty-free at any time. Some families use a Roth as a dual college/retirement vehicle. Downside: Roth withdrawals for college reduce retirement savings.
How 529 plans affect financial aid (FAFSA)
The 2024-2025 FAFSA simplification (FAFSA Simplification Act) brought significant changes to how 529 accounts are assessed:
- Parent-owned 529: Assessed at 5.64% of account value on FAFSA. A $100,000 529 balance reduces aid eligibility by approximately $5,640.
- Grandparent-owned 529 (major change): Under the simplified FAFSA, grandparent 529 distributions no longer appear in the student's income calculation. Previously, a grandparent distribution counted as 50% student income — effectively halving financial aid eligibility. This change makes grandparent 529s much more powerful for aid-seeking families.
- Student-owned 529: Assessed at the parent rate (5.64%) if the student is a dependent — a significant improvement from the old 20% rate.
How much should I save? The three-part framework
The widely-cited rule of thumb from financial planners is the 1/3 framework: plan to cover one-third of projected college costs from savings, one-third from current income at the time, and one-third from student loans or financial aid.
For families with high savings capacity, saving for the whole cost can remove the need for loans. Here is what it takes at this calculator's defaults: a 6% return compounded monthly, and college costs rising 5% a year from the College Board's 2025-26 budgets.
- $500/month from birth grows to about $193,700 by age 18. Four years at an in-state public school starting then are projected at about $321,500, so that covers about 60%.
- Covering all of it takes about $830/month from birth.
- $250/month from birth grows to about $96,800 by age 18, and $100/month to about $38,700.
The key insight: time is more powerful than contribution amount. $100/month starting at birth produces more than $200/month starting at age 9, despite the higher monthly contribution.
Prioritization: retirement before college
The universal financial planning rule is: maximize retirement savings before funding a 529. The logic is simple — your child can borrow for college, earn scholarships, work part-time, or attend a less expensive school. None of those options exist for retirement shortfalls.
The recommended order of operations:
- Capture your full employer 401(k) match (your employer adds money for each dollar you contribute, under your plan's terms and any vesting schedule)
- Pay off high-interest debt (credit cards, personal loans above 8%)
- Max your IRA ($7,500/yr in 2026; $8,600 if 50+)
- Max your 401(k) ($24,500/yr in 2026)
- Fund a 529 with remaining savings capacity
After your retirement accounts are fully funded, every dollar going into a 529 is an excellent use of savings: earnings spent on qualified education are tax-free, which can add up over 18 years, though the investment returns themselves are not guaranteed.
Choosing the right 529 plan
Each state offers its own 529 plan, but you can invest in any state's plan regardless of where you live. The key factors when choosing a plan:
- State tax benefit: If your state offers a tax deduction or credit for 529 contributions, start with your home state's plan.
- Low expense ratios: Look for plans that offer index fund options with expense ratios below 0.20%. Utah (my529), Nevada (Vanguard), and New York (Direct Plan) are consistently rated among the best for low costs.
- Age-based allocation options: Most plans offer a glide-path portfolio that automatically shifts from aggressive (stock-heavy) to conservative (bond-heavy) as the child approaches college age. This is the simplest approach for most families.
Frequently asked questions
How much should I save for college?
Use the 1/3 framework as a starting point: cover one-third from 529 savings, one-third from income at the time, one-third from loans and aid. For full funding of a 4-year in-state public school from birth, the calculator's defaults (a 6% return, costs rising 5% a year) need about $830 a month; $500 a month covers about 60%. Use the calculator above to model your specific situation.
What is a 529 plan?
A state-sponsored, tax-advantaged account for education expenses. Contributions are after-tax, but growth and qualified withdrawals are federal-income-tax-free. Some states also give a state tax deduction or credit for contributions. SECURE 2.0 added a Roth IRA rollover option for unused funds (up to $35,000 lifetime, 2024+).
What if my child does not use the 529?
Change the beneficiary to another family member, use up to $20,000 a year (from 2026) for K-12 costs, or roll up to $35,000 into the beneficiary's Roth IRA (15-year account minimum, SECURE 2.0). The "stuck in education" risk has been substantially reduced by recent legislation.
How does college inflation affect my savings goal?
At 5%/year, college costs double roughly every 14 years. A $30,990/year school today (the 2025-26 public in-state average budget) costs about $74,600/year in 18 years. This is why the projected cost in this calculator is significantly higher than the current sticker price — it accounts for 18 years of compounding inflation.
Should I pay off debt or save for college?
Pay off high-interest debt first. A 20% credit card rate is a guaranteed 20% return. Secure your own retirement second — maximize your 401(k) match and IRA contributions. Then fund the 529. You can borrow for college; you cannot borrow for retirement.