Updated: September 25, 2020

This calculator is designed to estimate future college costs and to project potential savings, providing information to help a family determine how much of the future cost they may be able to cover from their own savings.

This calculator has three main functions:

  1. Projecting the future cost of college in two ways:  estimated “sticker” or published price, and estimated “net” price, i.e., the actual price a family can expect to pay after scholarship and grant aid
  2. Projecting potential scholarship and grant aid available by the type of school and parent’s household income
  3. Projecting future savings given expected contributions to a 529 plan, and any savings gap (or surplus) for the type of college selected. Note – some versions of the calculator may generate savings projections using the licensee’s methodology.

Contents of this document:

  1. Inputs
  2. Outputs
    1. Approach and Sources
    2. College Cost Projections
    3. Projected College Savings

1. Inputs

All of these fields can be manually updated by the user

Name

Description

Example

Child’s age

Age of the child

2

Household Income

The income of the parent

$100,000

Current college savings

Initial amount

$1,000

Monthly Contribution

Recurring monthly contribution

$250

Rate of Return

The yearly rate of return

7.00%

Years of College

Number of years in the college

4

Type of College1

Private, in-state public, out-of-state public or community college

In-state public

Custom yearly cost

Field where user can enter their own cost of college

$25,000

Scholarships & Grant

The average amount of scholarships and grants

$3,000 / yr

Cost increase2

College inflation rate

2.95% /yr

1 Some versions of the calculator allow for users to select a specific institution by name in addition to a generic college type.

2 Some versions of the calculator do not allow the user to input a custom inflation rate.

2. Outputs

Name

Description

Example

Total cost of college

Projected sticker, or published, price for the number of years of college

$162,818

Scholarships & grants

Projected potential scholarship and grant aid estimated to be available to the student based on household income level

$22,676

Adjusted cost of college

Projected net price

$140,142

Projected college savings

Estimated savings at age 18 (or selected starting age for college)

$101,376

College savings gap

The difference between the adjusted cost of college and projected college savings  (if  > 0)

$38,766

College savings surplus

The difference between the projected savings and adjusted cost of college (if  > 0)

$0

2.1 Approach and Sources

We use Net Price, Sticker Price and college cost Inflation Rate, to calculate Scholarships & Grants. We use the Inflation Rate to project Net and Sticker Prices into the future, and estimate future Scholarships & Grants by subtracting the projected net price from the project sticker price to provide families with an estimate of their expected total future cost of college.

Institutions

The U.S. Department of Education compiles data in the Integrated Postsecondary Education Data System (IPEDS) database on all postsecondary educational institutions that participate in the Title IV program, and some institutions that do not participate in Title IV if they meet similar criteria to participating institutions. There are approximately 6,400 institutions included. IPEDS is managed by the National Center for Education Statistics, which falls under the U.S. Department of Education. This data is made available to the public through the College Scorecard. (https://collegescorecard.ed.gov/assets/FullDataDocumentation.pdf)

Users can use the calculator to estimate the future price of a specific educational institution or of a generic college type (e.g., private university or in-state public). The specific institutions available through the calculator are those available through the USDOE’s College Scorecard. Note that some versions of the calculator only allow the user to estimate future price of a generic college type and not of a specific institution.

Net Price Data

The College Scorecard captures the average net price to students at each institution, defined as the cost of attendance less all grant aid for federal aid recipients paying the in-state or in-district tuition rate.

The College Scorecard provides these net price data by family income categories in order to give students the most accurate data possible.

Net price data from the College Scorecard is divided by household income categories as follows:

  • $0 – $30,000
  • $30,001 – $48,000
  • $48,001 – $75,000
  • $75,001 – $110,000
  • greater than $110,000

We use the College Scorecard API to obtain the net price (by household income category) at each institution from this database. The IPEDS database and the College Scorecard are updated annually.

We use a representative sample from each school type to calculate the average net price by generic school type (private university, in-state public university, out-of-state public university, community college) and by income bracket on a national level. For some versions of the calculator, we also calculate average net price for in-state public university and out-of-state public university by state.

Sticker Price Data

The College Board publishes the Trends in College Pricing report annually in October. This report provides published, or sticker, prices by type of college (private, in-state public, out-of-state public and community college). https://research.collegeboard.org/trends/college-pricing

To estimate the sticker price of a specific institution:

  • SFC calculates a factor that represents the difference between the average net price (using data from the College Scorecard) and average sticker price (using data from Trends in College Pricing) by generic school type.
  • This factor is applied to the net price of a specific institution depending on which type it is (private, in-state public, out-of-state public or community college) to estimate its sticker price

These are the current sticker prices used in the calculator by generic school type. These figures represent the total cost of college including Tuition and Fees, Room and Board, Books and Supplies, Transportation, and Other Expenses.

Generic school type

Sticker Price

Private university

$53,980

In-state public university

$26,590

Out-of-state public university

$42,970

Community college

$18,420

SOURCE: College Board’s Trends in College Pricing 2019, Average estimated full-time undergraduate budgets by Sector, 2018-19 and 2019-20

Inflation Rate Data

The College Board’s Trends in Pricing report also provides annual inflation rates by school type. We use the latest year’s inflation rate in our projection calculations.

Generic school

Inflation rate

Private university

3.3%

In-state public university

2.6%

Out-of-state public university

2.5%

Community college

3.0%

SOURCE: College Board’s Trends in College Pricing 2019 actual inflation rates for total cost of college, 2019-20 vs. 2018-19

2.2 College Cost Projections

The calculation default expects the child will start college at 18 years old, so the number of years to project is 18 – child_age. Note that some versions of the calculator allow the user to select a different starting age. In this case, the calculation would be adjusted to use the selected starting age if different than 18.

Regardless of the child’s age, cost is projected for at least one year.

So the investment horizon is determined by:

The calculation to determine Total Cost of College (i.e., the projected sticker price) is:

Where the reference_price = the current sticker price of the selected generic college type or institution. 

The same calculation is applied to determine Adjusted Cost of College (i.e., project net price), but where the reference_price = current net price of the selected generic college type or institution, based on the user’s input household income level.

Scholarships & Grants are calculated as: grant_scholarships = sticker_price – net_price(income)

2.3 Projected College Savings*

*Note – The following section only applies to versions of the calculator that use the Savingforcollege.com methodology to generate projected college savings. Some versions of the calculator use the licensee’s methodology to project college savings instead. 

The goal is to project savings based on the user’s expected contributions to the rate of return.

We project year by year using compound interest with the following assumptions:

  • Compound interest is applied at the end of the year using 12 monthly contributions per year
  • Monthly contributions are assumed to be made at the beginning of each month 
  • Rate of return is assumed to be post-tax and net of fees

Default values

  • Rate of return: 6.00% (this can be updated by the user)

Algorithm for projecting college savings

For each year to project:

  1. Set initial amount based on current college savings plus monthly contributions
  2. Apply the compound interest with the rate of return 
  3. Set current balance as the initial amount for the next year
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