How it works
This tool answers a narrower question than it first appears to. It projects what a college education will cost by the time a child reaches 18, and then works out the level monthly deposit that would accumulate to that sum by the time they enrol. Two mechanics are easy to miss and they change how you should read the output. The first is that the savings horizon is fixed at 18 minus the child’s current age — the "years in college" input changes the total cost, because each additional year of study is another year of tuition inflation, but it does not give you any extra time to save. The second is that the monthly figure is an ordinary annuity: it assumes each deposit lands at the end of the month, and it assumes the balance stops compounding once enrolment begins. The projection runs in three steps. Years to enrol = 18 minus the child’s age, floored at 1. Future annual cost = current annual cost × (1 + inflation) to the power of years to enrol. Total cost = the sum of each year’s cost, inflated again for each year of study, because a four-year degree is paid for across four years and the second year costs more than the first. Then the deposit is solved from the ordinary-annuity future-value equation, using a monthly rate equal to the annual return divided by 12 and a term equal to years to enrol multiplied by 12. Worked example on the defaults: a 5-year-old, $25,000 a year today, 5% tuition inflation, four years of college and a 7% expected return on the savings. Years to enrol = 18 − 5 = 13. Future annual cost = $25,000 × 1.05^13. Since 1.05^13 = 1.885649, that is $47,141. Total cost = $47,141 × (1 + 1.05 + 1.1025 + 1.157625) = $47,141 × 4.310125 = $203,185. Deposit: the monthly rate is 0.07 ÷ 12 = 0.0058333 and the term is 156 months, so (1.0058333)^156 = 2.4777. Monthly = $203,185 × 0.0058333 ÷ 1.4777 = $802. Now change one input at a time, because the sensitivity is the real insight. Start when the child is 12 instead of 5 and the horizon collapses to six years: the total falls to $144,399 because there are fewer years of inflation to absorb, but the monthly deposit nearly triples to $1,620. Twelve years of delay multiplies the monthly requirement by about 2.7. Assume 3% tuition inflation instead of 5% and the total drops to $153,595 with a deposit of $606 — a two-point change in one assumption cuts the monthly requirement by a quarter. Model a $40,000 private college rather than a $25,000 public one and the deposit rises to $1,283 against a total of $325,095. What the tool deliberately leaves out matters as much as what it includes. It counts tuition and fees only: room and board, books, and travel are excluded, and for many residential students those add a substantial amount on top. It gives no credit for financial aid, scholarships or merit awards, all of which reduce the bill rather than the projection. It assumes the account keeps growing at the full assumed return during the college years, which is conservative — in practice you would move the money to cash as each year’s payment approaches, and it would earn less. And it assumes the child enrols at 18 and finishes in the number of years you entered. On the funding side, IRS Publication 970 sets out the tax treatment of qualified tuition programmes, and a 529 account is the usual wrapper because earnings used for qualified education expenses are not taxed. Since the SECURE 2.0 Act there is also a limited escape hatch: unused 529 money can be rolled into a Roth IRA for the beneficiary, up to a $35,000 lifetime cap, subject to the account having been open for 15 years and to contributions made in the last five years being ineligible. That matters because it removes the old objection that 529 money is trapped if the child does not go to college. On the borrowing side, a dependent undergraduate can borrow at most $31,000 in total in Direct Subsidized and Unsubsidized loans, of which no more than $23,000 may be subsidised, so the gap between the projection and the loan cap is the number the savings plan is really trying to close. Published tuition and fees run at roughly $11,600 a year for an in-state public four-year and roughly $43,000 for a private nonprofit four-year, per the College Board’s Trends in College Pricing, which is the benchmark the default inputs on this page are calibrated against.
Formula
Years to enrol = max(1, 18 − child’s current age)
Future annual cost = current annual cost × (1 + inflation) ^ years to enrol
Total cost = Σ (k = 0 … years in college − 1) of
future annual cost × (1 + inflation) ^ k
monthly rate = annual savings return ÷ 12
months = years to enrol × 12
monthly deposit = total cost × monthly rate
÷ ((1 + monthly rate) ^ months − 1)
Worked example — age 5, $25,000/yr, 5% inflation, 4 years, 7% return
years to enrol = 18 − 5 = 13
future annual = 25,000 × 1.05^13 = $47,141 (1.05^13 = 1.885649)
total cost = 47,141 × 4.310125 = $203,185
monthly rate = 0.07 ÷ 12 = 0.0058333
months = 13 × 12 = 156
growth factor = 1.0058333^156 = 2.4777
monthly deposit = 203,185 × 0.0058333 ÷ 1.4777 = $802
Sensitivity
child age 12 → 6-year horizon, total $144,399, deposit $1,620
age 0 → 18-year horizon, total $259,321, deposit $602
3% inflation → total $153,595, deposit $606
$40,000/yr → total $325,095, deposit $1,283
Tips
- Change the tuition inflation assumption before you change anything else. It is the single most powerful input on the page: moving from 5% to 3% cuts the monthly deposit from $802 to $606 in the default case, which is a quarter of the requirement.
- Start the deposit before the child is five if you can. At age 0 the same $25,000 college needs $602 a month; at age 5 it needs $802; at age 12 it needs $1,620. The monthly figure roughly triples over the last six years of the runway.
- Treat the projection as a tuition-only floor and budget separately for room, board and travel. Funding 60–80% of the projected figure and covering the rest with a combination of student earnings and the Direct Loan limits is a normal, workable plan.
- Use a 529 for the growth and check the state tax deduction separately — many states allow a deduction or credit for contributions, which the federal treatment does not provide. Verify the 15-year account-age rule before relying on the Roth IRA rollover option.
Frequently asked questions
- Why does changing "years in college" not change how long I have to save?
- Because the savings horizon is defined as 18 minus the child’s current age, and that calculation does not reference the years-in-college input at all. Adding a fifth year of study raises the total cost, since that extra year is inflated to the enrolment date and beyond, but it leaves the 13-year runway in the default case untouched. If you want to model a longer runway you have to change the child’s age, not the years of study.
- Is the monthly figure a beginning-of-month or end-of-month deposit?
- End of month. The engine solves the ordinary-annuity future-value equation, which discounts the first payment by one full month. Paying at the beginning of each month instead would reduce the required deposit slightly, by roughly the monthly rate — about half a percent, or around $4 a month on the $802 default. That is small enough not to change any decision, but it means the tool is very slightly conservative if you set up the transfer to run on payday.
- Does the calculator assume my savings keep growing during the college years?
- No. The deposit is sized so that the balance equals the total projected cost at the enrolment date, and it does not model what happens to that balance afterwards. In practice you would not hold the whole four-year cost in equities on the first day of freshman year — the usual approach is to move each year’s payment into cash or a short-term instrument as it approaches. The projection is therefore neither optimistic nor pessimistic on this point; it simply stops at the moment of enrolment.
- Should I use 5% tuition inflation, or something lower?
- The default of 5% sits close to the long-run average for published tuition and fees, which has grown faster than headline consumer inflation for decades. More recent years have been slower, closer to 2–3% at many institutions, which is why the tool lets you go as low as 0%. Running both ends is the honest approach: 5% produces a $802 monthly deposit on the defaults and 3% produces $606, so the inflation assumption is worth about a quarter of the requirement. Choosing the lower figure is a bet that the last five years are more representative than the last thirty.
- What if my child gets a scholarship or decides not to go?
- The projection assumes full sticker cost, so a scholarship makes it pessimistic rather than wrong. On the not-going question, a 529 is no longer the trap it once was: unused funds can be rolled into a Roth IRA for the same beneficiary up to a $35,000 lifetime limit, provided the account has been open at least 15 years and the contributions being moved were made more than five years ago. The beneficiary can also be changed to another family member. Both options are set out in IRS Publication 970 and are worth confirming against current guidance before you rely on them.
- How much can my child borrow, and how does that compare with the projection?
- A dependent undergraduate can borrow a maximum of $31,000 across all years in Direct Subsidized and Unsubsidized loans, of which at most $23,000 can be subsidised. Against a projected total cost of $203,185 for the default case, that covers about 15%. The rest has to come from savings, current income, institutional aid, merit awards or a parent loan. The gap between the projection and the loan cap is the number the savings plan is actually trying to close, which is why most plans target 50–80% rather than 100%.
- Does the projection include room and board?
- No. The current-cost input is described as annual college cost and the default of $25,000 is calibrated to published tuition and fees, so it behaves as a tuition figure. Living costs are a separate and substantial line item — for a residential student they can add as much again as tuition at a public institution. If you want a total-cost projection, add your estimate of room, board, books and travel to the current-cost input before running it, and note that those components generally inflate more slowly than tuition.