How Much to Save for College

Abigail Eun
Abigail Eun

Abigail Eun is a freelance writer and personal finance expert. Through diligent research and continuous learning, she has honed her knowledge in budgeting, saving, investing, and debt management. Abigail is passionate about helping people get their finances in order. She believes that everyone should have access to the information they need to make sound financial decisions. Her goal is to provide clear and concise information that is easy to understand.

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Daniel Kahn
Daniel Kahn
Daniel is the co-founder and COO at Sparrow. Daniel is responsible for the day-to-day operations of a company, working closely with other members of the executive team to develop and implement strategies to support the growth and success of the company.
Daniel was a 2023 Forbes 30 Under 30 lister in the Education category.  Daniel was born and raised in Raleigh, North Carolina and graduated from Duke University in 2020.
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Camden Ford
Camden Ford

Camden leads Sparrow’s business operations – everything from product management to business analytics. After graduating Cum Laude from Duke University where he studied Civil Engineering, Camden worked as a Consultant for A.T. Kearney where he worked in their Strategic Operations practice. With a strong background in analytics, Camden strives to deliver data-driven conclusions and insights.

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November 13, 2023

While having a college degree is extremely beneficial and advantageous in our modern world, many people don’t talk about how costly it can be. 

Saving for college is in your best interest if you want to be able to pay for your education comfortably, but there are still many ways to make college affordable. 

Let’s find out what these options are and how you can make your dreams of college more accessible. 

How Much Does a 4-Year College Actually Cost?

College tuition has seen a notable increase in the past forty years due to inflation, growing disproportionately to other consumer goods in the economy.

The average cost of tuition, fees, and room/board at four-year public colleges increased by 179.2% over the past twenty years, with an annual average increase of 9%.

For private colleges, the average cost of tuition, fees, and room/board increased by 124.2% with an annual average increase of 6.2%.

Inflation rates and the severity of their growth depend on the type of school. Due to funding, the tuition for public schools usually increases more than the tuition for private schools on an annual basis.

Source: Education Data

In simple terms, inflation is the rate of increase in the prices of a specific consumer good (cars, loans, electronics, etc.) over a period of time. Inflation fluctuates in every aspect of our economy where things are being bought and sold, though the inflation rate for college tuition has grown exponentially over the years. 

College rates have been increasing since the 1980s, and though there is no exact explanation behind this, researchers attribute the increase to the following factors:

  • More student support services: Since the 1980s, colleges have begun to offer more services to students like mental health services, health insurance, and college counseling, which costs more than just a standard college education. 
  • Changes in state and local funding: Public institutions rely on state and local funding to operate, though state and local funding fluctuates based on the economy, market conditions, and tax revenue. If universities receive less public funding, tuition increases for students to make up the difference. 

It’s crucial to start saving for college as early as possible so that you can combat the rising costs of college tuition. 

How to Approach Rising College Costs

While the unyielding rising costs of college may seem overwhelming, being an informed consumer and exploring your financial options will mitigate the financial burden of a college education.

You can apply for federal financial aid, scholarships, grants, and loans to lower the cost of college. In addition, speak with your high school counselor or your college’s financial aid office for financial advice and knowledge. 

Having a plan to save for college is imperative to meet your saving goals. 

How Much Should I Have Saved Up for College?

As a Parent/Guardian

It’s never too early to start saving for your child’s college education. In fact, 42% of parents state they wish they would have started saving earlier.

Because of volatile market rates, unpredictable financial aid, as well as the uphill growth of college tuition, it can be difficult to determine whether or not parents have saved enough money to pay for their child’s college tuition. 

The following ratios calculate the ideal amount of money that parents should have saved in their student’s college fund. 

The ⅓ Rule

The ⅓ Rule dictates that parents should save for college by dividing the cost of tuition into thirds: ⅓ of the college tuition should be paid with savings, ⅓ of tuition should be paid with income, and the last ⅓ should be paid with loans/grants/scholarships.

According to the ⅓ rule, parents should save the average cost of college tuition for the year that their child was born.

For example, if a child was born in 2001 and the average cost of tuition that year was $23,528, parents should have $23,528 in their child’s college fund by the year their child goes to college. This way, the cost of inflation is accounted for, and the amount is roughly ⅓ of the child’s tuition when they are of age to attend college. 

The 2k Rule

Fidelity’s 2k Rule assumes that parents are expecting to cover 50% of their child’s college tuition with their college savings and that the cost of tuition will grow 3% above the national inflation rate in a four-year period. 

In order to calculate how much you should save for college, follow these steps:

  1. Determine the average annual tuition for your student’s target college/type of college.
  2. Multiply the average annual tuition by the percentage you plan to pay for with your college savings.
  3. For every $10,000 you cover per year, multiply your child’s age by $2,000.

Fidelity also offers a college savings calculator that does the math for you. 

As a College Student

If you’re a college student paying for your education on your own, all the power to you. While there isn’t a textbook amount of money that you should have saved on your own, the ideal amount to have saved is the same as it is for parents: $2,000 per year.

This is not feasible for the vast majority of students, especially since you can’t begin to work legally until you’re 15 and ½ years old.

Your best option would be to save as much money as you can and make applying to scholarships and grants your first priority. 

You can only apply for financial aid once a year, but there are always going to be scholarships and grants available to you. The more free money you can get, the better. 

How to Get Extra Money for College

If you don’t have sufficient college savings, don’t lose hope! There are still other ways that you can save for college. 

Pick Up a Side Hustle

Nearly 30% of high school students are employed during a portion of their schooling. Picking up a job or a side hustle is not only a great way to make extra money for college, but to explore your interests, pick up soft and hard skills, and develop a strong work ethic.

Whether you want to work part-time at Starbucks, tutor students after school at an hourly rate set by yourself, or intern at a law firm, having that flow of income will be extremely beneficial if you save your money wisely. 

Many employers also offer tuition reimbursement programs. So, not only could you make an income from working, you could gain extra free money in tuition reimbursement.

Apply to Scholarships

A scholarship is a form of financial aid that is awarded to students to support their college expenses. Scholarships are usually awarded based on merit, financial need, or other significant achievements. 

Scholarships come in all shapes and sizes: some scholarships are one-time checks, and others cover your school supplies for your four years at college. 

There are three types of scholarships: statewide scholarships, private scholarships, and institutional scholarships.

Statewide scholarships are offered by the state. This can either be the state you plan to attend college in or your native state. For example, California offers the Association of California Water Agencies Awards scholarship and Utah has the Utah Promise Scholarship. 

Private scholarships are sponsored by private or non-profit organizations. These scholarships can be offered by professional organizations, ethnic organizations, community centers, etc.

Institutional scholarships are offered by the college you plan to attend. Be sure to do research on what specific scholarships are offered at your institution, and contact your school’s financial aid office for more information. 

Scholarships are your best option when it comes to saving for college because you can apply to as many scholarships as you want, whenever you want. Whether you’re a freshman or senior in high school, there are many scholarship options available to you. 

Look for Grants

Grants will be your second best option to save for college. 

While scholarships can be awarded based on merit, achievement, and/or financial need, grants are only offered to students who demonstrate financial need. 

Grant aid is also a form of financial aid that does not need to be paid back and can come from the federal government, state governments, institutions, and private organizations. 

For example, the federal government offers grants like the Pell Grant, while the state of Michigan offers the Michigan Tuition Grant.

If you want to receive grants, you’ll need to demonstrate financial need. In order to do this, you need to submit your Free Application for Federal Student Aid (FAFSA) so that the federal government’s student aid agency can calculate how much aid you need and your expected family contribution. 

Most grants will ask you to send a copy of your FAFSA to determine your financial standing, so submitting your application is a crucial step if you want to receive grants. 

Search engines such as and are great places to begin your private grant search to pay for your college tuition. 

Explore Loan Options As a Last Resort

Once you’ve exhausted your scholarship and grant options, consider applying for student loans if you still need more financial aid. 

Unlike grants and scholarships, student loans need to be paid back and are given out based on your credit history, your cosigner, as well as your financial status. 

There are two main types of loans: private and federal.

Federal loans are student loans that are offered by the government and should be the first option that you should consider. Federal loans are usually more forgiving than private loans and offer loan consolidation and forgiveness options, and don’t require a cosigner. 

The federal government offers four loan options: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS loans, and Direct Consolidation Loans

On the other hand, while private loans are more varied and numerous, they can be trickier and more difficult to navigate than federal student loans. Because most students don’t have a credit history, they will most likely need a cosigner to originate a private loan. Without a cosigner, student borrowers tend to have slimmer chances of acquiring a student loan with competitive repayment options or interest rates. 

While taking out a student loan is not the most optimal way to pay your college tuition, due to interest accretion and repayment contracts, student loans are a great way to start building your credit history as a student.

Usually, private student loans have a prequalification option to determine whether or not you would be eligible for the student loan. Most private student loans require you to submit an application and undergo a hard inquiry, or a credit check, which lowers your credit score temporarily.

Sparrow offers a free, online tool that allows you to see which loans you qualify for without any cost or impact on your credit score. Submit an application with us today to find the best student loan options you are eligible for on the market.

Closing Thoughts From the Nest

Choosing a school and getting into college is already difficult enough, but saving for college and paying for it is a whole other battle. 

While affording college might seem like an impossible task that has no gain for a seemingly substantial financial loss, attending college is not a futile attempt and students/parents should not be discouraged due to costs. 

Students can always apply for grants and scholarships. Picking up a side hustle is a great way to earn money as a student, and institutional work-study is an option as well. Unless the student’s family is making an annual income of $250,000 or more, the family can qualify for federal financial aid. Student loans can also significantly cover the cost of tuition. 

Being an informed consumer is crucial to saving for and affording college, so make sure to explore all of the options available to you.

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