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College tuition costs

Deducting college expenses

Prepaid tuition (529) plans

College savings (529) plans

Using UGMA/UTMA accounts

Loans & interest deductions

Qualifying for student aid

Tax credits for education

Education savings bonds

Education Savings Accounts

Other IRAs & 401(k) plans

Room-and-board options

Grandparents & other sponsors

College tuition costs

The cost to attend college continues to rise faster than inflation. For the 2020-21 school year, average tuition and fees at public four-year colleges or universities rose 1.1% to $10,560, according to the College Board report, "Trends in College Pricing 2020".

For private nonprofit four-year colleges and universities, average tuition costs rose 2.1% over the year earlier, to $37,650. If you add the cost of room and board, the average bill at public institutions rose 1.0% to $22,180. For private institutions, the combined bill rose 1.8% to $50,770. (Note: all data are weighted for enrollment statistics.)

The trend of college costs growing faster than overall prices is also a long-term one. Adjusted for inflation, tuition and fee costs at public colleges have grown 278% over the past thirty years, according to the College Board. Tuition and fee increases at private schools have outgrown inflation by 203% over the same period.

With increasing costs like these, saving for a child's college education is a daunting challenge. However, choosing not to attend college has graver consequences. On average, a person between the ages of 25 and 34 with a college degree earned 89% more in 2019 than a high school graduate, according to the Census Bureau.

Several alternatives exist to pay for a college education, whether it is an education for your child, grandchild, or yourself. In addition, the Economic Growth and Tax Relief Reconciliation Act of 2001 expanded college-savings incentives.

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.

Next, we'll take a look at a former tax benefit that allows you to deduct qualified higher-education expenses.

Next Topic: Deducting college expenses
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