When it comes to preparing for college, the financial challenge can feel like climbing a mountain that grows taller each year. The rising costs of higher education make savings essential, but where do you start? It’s not just about the tuition, housing, books, and even meal plans all add up, leaving many families juggling between saving, planning, and ensuring flexibility.

This guide breaks it down step by step, shedding light on education costs, flexible savings plans, and other strategies to ease the climb toward college readiness.

Preparing for the Journey to College

The cost of college has been steadily climbing for three decades, with public and private tuition rates increasing annually by 3.2% and 3.7%, respectively, according to the College Board. Add in changing state and federal support through grants or scholarships and increased demand, and it’s clear that early planning is more critical than ever. 

But we hear you, balancing savings with everyday expenses is daunting. The good news? By setting realistic goals and using the right tools, the financial burden can be minimized. Let's explore how.

The Cost of Higher Education

Average Tuition Trends Over Time

Understanding how college tuition has grown paints a clear picture of the need to be strategic. Consider these facts:

• Public Colleges: Average in-state tuition in 1990 was less than the cost of a decade’s worth of today’s Netflix subscription. Today, public tuition has grown by a compound annual rate of 3.2%.
• Private Colleges: Private four-year institutions have seen an even greater increase of 3.7% annually to their sticker price, though come often with greater grants and scholarships.

When broken out within decades, the below chart from Educationdata.org helps illustrate how the undergraduate costs have been slowing:

Nerd Note: The cost of many graduate schools has outpaced these figures, while associateship programs have consistently inflated lower than their counterparts. For a deeper dive in these historical price changes, find the College Board study here.

Types of College Expenses

Planning for tuition is an excellent start, but college costs go beyond just the headline numbers. Here are some other expenses families should consider incorporating into their plan:

• Housing and Meal Plans
• Books and Supplies
• Technology (Laptops, Software)
• Transportation

By thinking about all potential expenses, you can minimize surprises when your student steps on campus for the first time.

 Flexible Savings Plans to Consider

What Are 529 Plans?

A 529 plan is the Superman of college savings tools. Designed specifically for education costs, these state-administered plans come with notable perks, including tax-free growth and flexibility. 

There are two types of 529 plans to consider:

• Prepaid Tuition Plans: Lock in today’s tuition prices at participating colleges and avoid future inflation.
• College Savings Plans: The most common type with investment-focused accounts that cover tuition, fees, books, room, and board.

For purposes of this discussion, we will focus on the College Savings Plans, as they allow the most flexibility in planning for future education. 

These types of plans benefit from the tax free growth on the account when paid for qualifying education expenses of the beneficiary. For a comprehensive list of eligible expenses in addition to tuition/fees, room & board, visit this link. For additional flexibility, parents often are the account owner and shift the beneficiary as needed for tuition expenses. 

Nerd Note: Did you know that 529 plans aren’t just for college anymore? You can now use them to pay K-12 private school tuition as well with up to $10,000 per year, per beneficiary. Up to $10,000 per beneficiary may also be used to pay back college loans already taken out.

529 Plan Options

State Administered

While all 50 states have 529 plans, no individual in any state is tied to using their state’s 529 plan. A mixture of considerations should be had before selecting any individual plan including plan fees, investment options, user experience and state tax considerations.

State Tax considerations

The below map of the U.S. as of 2025 shows which states there are no tax benefits from selecting the home states funds, with shades of blue denoting what the potential annual tax savings may be for those choosing their home states program:

Investments & Fees

Each program will have several fees, including individual fund fees and manager or program fees paid to the investment company who administers the program. The investment research platform Morningstar assigns ratings each year to these programs largely on the investment options and fees associated with each. 

Nerd Note: The Utah my529 plan has consistently been a leader in this space and offer a very easy experience, like providing you with a QR code to put into birthday invites or holiday cards so people can easily contribute to the fund with you!

Emergency Back-Up Plans (Custodial Roth IRAs)

Not every family feels confident predicting whether their children will choose higher education. While there are an expanding amount of options, a 529 may be used for, including distributions without penalty when scholarships and grants are received, they are not the only option. 

For those looking for flexibility, Custodial Roth IRAs offer a brilliant alternative. These accounts serve two purposes, education savings and retirement planning, making your contributions work double-duty. 

Pro Tip: Too often do I see children with Roth IRAs that had no earned income in their lives as their parents helped fund them, which is not legal. For ANY IRA to be funded, at least that much in earned income by the account owner needs to be earned in the year of contribution.

Exploring Loan Options

Of course, even with savings, families may need additional help covering costs. Loans can support students and parents alike, but understanding the pros and cons of each type is crucial.

Federal Student Loans

Federal loans are generally the safest first step for families due to their borrower-friendly features like fixed interest rates, income-driven repayment plans, and forgiveness options. The path forward will be through filling out the FAFSA, with the universal Stafford Loan program offering $5,500-$7,500 per year per borrower for undergraduate students and up to cost of attendance for graduate borrowers. 

These come with protections that may be a huge benefit, with forgiveness upon disability, debt, and other favorable terms and forgiveness plan. For graduate borrowers, the ability to pay based on income can be incredibly worthwhile. 

Nerd Note: Through leveraging Federal loans, the majority of borrowers from 2020-2025 had $0 payments allowing them to save elsewhere. At the end of 2024, careful planning allowed a graduate client of mind to have their ~$757,000 of loans be FORGIVEN, tax free!

State-Based Loan Programs

Depending on your state of residence, localized loan programs may offer competitive rates and added perks like reduced fees.

Private Loans

While private loans sometimes feature lower fixed rates for borrowers with excellent credit, they carry risks such as less flexible repayment terms. These work best as a supplement to federal or state-based options.

Investment Account Funding Basics

For families looking to maximize their savings potential, investment accounts present an opportunity to grow funds well before college begins. 

Why Investment Accounts Are Valuable 

Whether in a 529, Custodial Roth, or even non-retirement account that you own, by starting early, investment accounts leverage the power of compounding interest, offering significant growth potential over the years. For example, families saving $200 a month over 18 years with a 6% return can amass roughly $86,000, a welcome contribution toward tuition and expenses.

Balanced Risk and Reward 

When investing for education, aligning your risk tolerance with your timelines is essential. If the college is still many years away, slightly riskier investments might offer better returns. For those with teens, conservative investments are generally a safer bet. 

529 plans, similar to 401(k) accounts through employers, offer “Target Date” or “Age Based” options, which are the easy button to set it and forget it based on the year of enrollment, which will become more conservative automatically over time.

Tips to Simplify Your College Plan

Set Realistic Expectations

Not sure where to begin? Aiming for in-state tuition at a public school ($20,000–$30,000 annually) is a practical starting point for many families. Use this target to guide your savings and adjust based on your family’s specific goals. 

Regularly Reassess Your Goals 

Family circumstances and college costs can change over time, so revisit your savings strategy annually. Adjusting as needed, whether due to increased income or shifts in college priorities, keeps you on track without stress.

Your Next Steps to Stay on Track 

Navigating the college planning maze can feel overwhelming, but you don’t have to go it alone. From exploring the benefits of 529 plans to identifying the savings strategy that suits your family best, you’re building a foundation for your child’s future success. 

If you're ready to take the next step, consider partnering with HealthyInsights. Our advisors and Certified Student Loan Professional can provide practical guidance to help you maximize savings and make informed financial decisions. 

Start planning today! Schedule a consultation with HealthyInsights to learn how to maximize your college savings strategy.