​College is expensive. Hold on, let’s be honest: College Very Expensive. Higher education costs as much as a small mortgage, but without owning a home.

Even at in-state public four-year colleges, the average cost of a bachelor’s degree will soon break into the six figures. And, in 17 years, the most expensive college will cost more than Half a Million Dollars. Yikes!

                                  The 1/3 Rule
The 1/3 Rule is based on the idea that people rarely pay for a major expense in one big lump sum. Rather, they spread out the costs over time by combining savings and debt with current income. One-third of the cost might come from past income (savings), one-third from current income, and one-third from future income (loans).

The one-third ratio provides a rough cut of a split. It is possible that some parents will save more and, therefore, need to borrow less. Other parents don’t save as much and may be forced to borrow more or send their children to less expensive colleges.

Most families plan to save each child about a third of future college costs. On average, however, families save only about 10% of college costs when the child turns 18, falling short of the goal.

                                    The 3X Rule
Based on historical college cost data, the cost of a college education roughly triples over any 17-year period from birth to college enrollment.

That’s the equivalent of an average college cost inflation rate of 6.6%. Tuition and fees tend to grow faster than the total attendance cost, including room and board. Tuition inflation rates are lower at private non-profit four-year colleges than at public four-year colleges, partly because private college costs are higher.

             How to Set Your College Savings Goal?
Since 3 x 1/3 = 1, that suggests that the college savings goal should be equal to the complete cost of a college education the year the baby was born. Saving this amount will yield enough money to cover about a third of the future college costs.

You might not be able to predict the specific college in which your child will enroll 17 years from now, but you might be able to predict the type of college, such as an instant public four-year college or a private four-year college.

The College Board’s annual Trends in College Pricing publication reports an average cost of attendance (tuition, fees, room and board) in 2022-2023 as follows:

Public four-year college (In-State): $25,707
Public four-year college (Out-of-State): $44,014
Private Non-Profit four-year college: $54,501

Assuming that the current inflation rates of 3.1%, 3.2%, and 3.5% continue, the Complete Cost of a College Education for this year’s college freshmen will be about $103,480, $172,200, and $218,520.

                   Monthly Contribution Amounts
These figures can be converted into equivalent monthly 529 plan contribution amounts, assuming 17 years from birth to matriculation.

For a child born this year, parents should save at least $350 per month for an instant public four-year college, $550 per month for an out-of-state public four-year college, and $650 per month for a private non-profit four-year college from birth to college enrollment.