College Redux

One of my first posts to the blog was this one: Saving For College.

After doing some more research, here are my amended thoughts.
1. College tuition seems to be outstripping inflation and the S&P 500.  This has gone on for a while and shows no signs of letting up.  However, the best that we can do as parents is invest somewhat aggressively, then when each kid turns 15 or so become more conservative, and hope for the best.
2. My current plan is to try and save 60% of tuition (for each kid, including any grandparent contributions), pay 20% with current income, and get loans for the remaining 20%.

For Ethan assuming (a) private college, which is currently averaging (per the College Board ) $39,028 per year, (b) that he will be entering in approximately 13 years, and (c) that tuition increases 6% per year:  $364,160 (pretty close to what it worked out to be last time)

Assuming that we want to save pay 60% from savings, that means we need to have $218,496 saved, which would mean saving about $928 per month.  However, if I already have 10K in a 529 plan (not sure if I do, but could be close) and if my parents have already put 50K into a GET (not sure why anyone would use a GET, but that is another story altogether), then I only need to save $373 per month.

Without a college calculator (see prior post for a couple), I did a "back of the envelope" calculation, and made this determination:

2008-2009 Williams tuition plus fees and expenses (I think including room and board) $37,640 or Whitman $35,192. Average = $36,416

For 4 years = $145,664, which we assume is what we need today to put away to meet future cost, so it can grow and keep pace with rising tuition costs (even though it has outstripped inflation and CPI and avg returns recently). Then take 60% of that for $87,398

If we already have $60K saved, then that totals $27,398 to have saved today (which is impossible).

However, the FV of $27398 at 6% in 13 years is $59,652 and the monthly savings at 6% to generate that $59,652 would be $253.  Makes things look doable for us but the delta from the calculator's numbers makes me think something got left out.

Big Lie is that the investments and tuition will grow at 6%.  More likely is that the money invested grows slower than tuition.  Too scared to try and run the numbers assuming tuition grows at 6.5% and investments at 4.5%.

OK, ran it on the second set of numbers - means I only need to save about $300 per month per kid.  Still something seems off compared to the calculator. Regardless, need to continue to hope for financial aid as our savings are not going to cover even 60% of the costs.

A big question mark will be the application of GET money - will it grow at the rate of private school tuition, public school tuition, or investments generally, and then how will it be applied to cover college costs.  Could be the difference between us needing save $300 per month or $600 per month.  Either way a deficit compared to what is actually occurring, the question is how big a deficit.