Education Savings
IN THIS LESSON
Many people consider a mix of savings, loans, financial aid, grants and scholarships when considering the total expenses when saving for education. Set a savings goal that covers a significant portion of the expected expenses, such as aiming to save 50% of the projected total cost.
Student Aid Index
A good idea would be to first calculate what your Student Aid Index number is. You should save based on that figure.
The formula used to determine your financial aid eligibility under FAFSA is called your Student Aid Index (SAI). The SAI replaces the Expected Family Contribution (EFC) starting in the 2024–25 award year. SAI is an index number that’s calculated using the information that you and your contributors provide on the FAFSA form. Your SAI can range anywhere from –1500 to 999999. Note that it is not a dollar amount. Once your college, career school, or trade school knows your SAI, they will use it to calculate how much and what types of financial aid you’re eligible to receive.
Covered Expenses
A 529 plan allows you to save for several types of qualified education expenses including:
Public colleges
Private colleges
Community college
Vocational programs
Trade Schools
K-12 Education
Special Needs education: This may include costs associated with special education programs, tutors, therapies, and other related services
We’ve included a whole list of Qualified Education Expenses that you will want to consider. In addition, we’ve outlined for you the average costs of each type of education, and how much of the cost you should project to save. Be sure to consider inflation and the number of years until the goal when estimating future costs.
Public Colleges:
According to CollegeBoard’s “Trends in College Pricing 2021” report, the average published tuition and fees for in-state students at public four-year colleges was $10,560 for the 2021–2022 academic year.
It’s important to note that actual costs can vary significantly depending on factors such as the state, specific college, and whether the student is living on-campus or off-campus. For example, fees for public four-year colleges in California can range from around $5,000 to $15,000 per year, while in New York, the range is approximately $7,000 to $25,000 per year. Some flagship public universities in New York, such as the State University of New York (SUNY) and the City University of New York (CUNY), have published tuition and fees ranging from $7,000 to $10,000 per year.
Private Colleges:
CollegeBoard’s report states that the average published tuition and fees for private nonprofit four-year colleges was $37,430 for the 2021–2022 academic year. NOTE: Some private institutions may have significantly higher tuition and fees. For example, the average tuition and fees at private four-year colleges in New York can range from around $30,000 to $70,000 per year. Some Ivy League universities in New York, such as Columbia University, have tuition and fees exceeding $60,000 per year, and Cornell University has published its tuition and fees exceeding $80,000 per year.
Community College:
Community colleges generally have lower tuition costs compared to public and private colleges. According to CollegeBoard, the average published tuition and fees for public two-year colleges (community colleges) was $3,770 for the 2021–2022 academic year. The average tuition and fees at community colleges in Illinois can range from around $4,000 to $8,000 per year, while in New York, the range is approximately $4,000 to $6,000 per year.
Vocational Programs:
Research the vocational programs your may be interested in and find out their costs or projected future costs. NOTE: Tuition costs can vary depending on the specific program and duration. Consider the length of the program and any additional expenses like tools, equipment, or materials.
Example costs for Vocational Programs within New York:
The Institute of Culinary Education (ICE) offers various culinary and pastry arts programs. Tuition for their professional programs can range from around $10,000 to $45,000, depending on the duration and specialization.
The Fashion Institute of Technology (FIT) provides vocational education in fashion-related fields. Tuition for their programs can vary, with associate degree programs costing around $6,800 per year for New York State residents and $14,400 per year for out-of-state residents.
Trade Schools:
Trade schools can offer specialized training in various trades and professions. NOTE: Tuition costs can vary depending on the specific program and duration. Consider the length of the program and any additional expenses related to the chosen trade.
Example costs for Trade Schools within New York:
Apex Technical School offers programs in automotive technology, HVAC, and plumbing. Tuition for their programs can range from approximately $15,000 to $25,000, depending on the program length and trade.
Lincoln Technical Institute offers a variety of trade programs, including automotive technology, electrical systems, HVAC, and welding. Tuition costs can range from around $20,000 to $35,000, depending on the program.
K-12 Education:
The use of 529 plan funds for K-12 education expenses varies by state, and eligibility may differ. Research your state’s guidelines on using 529 plan funds for K-12 education expenses, including tuition, fees, and other related expenses. The costs of private K-12 education can vary widely depending on the region, specific school, grade level, and additional fees. For example, private elementary and secondary schools in New York can range from around $10,000 to $40,000 per year, while in California, the range is approximately $5,000 to $30,000 per year.
Special Needs Education:
Special needs education expenses can vary greatly depending on the specific needs and requirements of the child. Included in the definition is expenses for tutors, therapists, and adaptive equipment.
Room, Board, and Transportation:
Room and board expenses for students enrolled at least half-time vary depending on the institution and location. On-campus housing costs typically range from $10,000 to $15,000 per academic year, while off-campus housing costs can vary widely based on the rental market. Transportation expenses may include costs associated with commuting to and from campus, as well as travel expenses for study abroad programs or internships. These costs can range from a few hundred dollars per semester for local commuting to several thousand dollars for international travel.
Books, Technology, and Supplies:
Required textbooks can cost anywhere from $100 to $500 per course, depending on the subject and edition. Supplemental materials and lab manuals may incur additional expenses. Technology expenses, such as purchasing a laptop or software, can range from $500 to $2,000 or more, depending on the specifications and requirements of the program. Supplies like notebooks, pens, and other stationery items typically cost between $50 to $200 per semester, depending on the student’s preferences and course requirements.
Study Abroad Programs:
Tuition and fees for study abroad programs can vary significantly depending on the destination and program duration. Costs typically range from $5,000 to $15,000 per semester, excluding additional expenses for travel, accommodation, and meals.
Non-Qualified Expenses
Non-qualified expenses such as insurance, student loan interest, and certain extracurricular activities are not eligible for tax-free withdrawals from a 529 plan. These expenses should be budgeted for separately to avoid penalties and taxes on withdrawals.