Save early, stress less: Planning ahead for rising college costs

When you're focused on the immediate needs of young children, college might seem like a distant concern. However, time passes quickly, and when it comes to saving for higher education, an early start may make a significant difference. Even modest contributions now can help you avoid the all-too-common regret of not having started sooner.

College costs continue to rise

The cost of college education keeps increasing year after year. For the 2024–2025 academic year, average costs for fees and tuition are:²

• Private nonprofit four-year colleges: $43,350
• Public four-year colleges (in-state): $11,610
• Public four-year colleges (out-of-state): $30,780

Assuming tuition grows 3%–5% annually, a child born today could face more than $87,000 a year to attend a private college by age 18³. This is a substantial amount for any family, but with foresight and a disciplined plan, it's possible to prepare adequately.

Starting early allows you to potentially benefit from compound growth, helping your investments keep pace with inflation and tuition increases. It also may provide more flexibility and fewer difficult decisions when it's time to choose a school.

Increased savings now can reduce future borrowing

Student loans are a common way families pay for college — but they can add significant financial strain long after graduation. Nearly half of families (49%) borrowed for college last year, according to a recent Sallie Mae and Ipsos study,⁴ and the cost of borrowing has risen sharply.

In fact, student loan interest rates have seen a significant increase in recent years. For the 2025–2026 academic year, federal student loan rates for undergraduate borrowers have reached 6.4%, nearly double the rates from two years prior.¹ This increase can result in substantially higher interest payments over the life of a loan, underscoring the importance of early savings.

To put this in perspective, graduating with student loans at these higher interest rates could be likened to adding an extra monthly cable bill to your budget. However, unlike cable or streaming services, student loan payments are not optional.

For parents, relying heavily on loans to fund their children's education could necessitate compromises in retirement planning or other financial priorities. By saving early, families can potentially reduce or eliminate the need for borrowing, thus avoiding the financial strain associated with high-interest debt.

529 plans: An efficient savings tool

A 529 college savings plan is designed to optimize your savings efforts. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses.⁵ Over time, this tax advantage can be substantial.

For example, a one-time $10,000 contribution earning 5% annually could grow nearly $6,000 more in a 529 plan than in a taxable account over 18 years.⁶ Many families find it manageable to contribute gradually, which can still lead to significant impact over time.

Start early, think long-term

While college may seem far off, beginning to save now puts you in a position of greater control. With the tax benefits and flexibility of a 529 plan, you can potentially build an education fund over time without compromising your own financial future.

Whether you're setting aside $50 a month or allocating a portion of a bonus, consistency is key. Your future self — and your future student — will certainly appreciate the foresight.

Want to estimate your potential savings with a CollegeBound 529 plan? Check out our college savings calculator.