The Escalating Costs of College Tuition: A Generational Challenge
The rising cost of college tuition is a growing concern for families. Unless dramatic changes occur, college will be unaffordable for most students in 20 years. The only exceptions will be children of the wealthy and those who start saving early and choose to attend modestly priced schools. This article explores the projected costs of college tuition in the coming years and discusses the importance of early planning and saving.
Historical Tuition Inflation
College tuition costs have risen dramatically. According to educationdata.org, since 1968, the annual tuition inflation (TI) rate at public four-year universities has been 6.53%. Compare that to the US economy's average inflation rate of 3.98% in the same period. That’s right, tuition has outpaced general inflation by 2 ½%. The fact that college tuition has increased far more than general inflation rates supports my claim that higher education is increasingly unaffordable.
Projecting Future Tuition Costs
Assuming tuition rate inflation continues, what will a college education cost in 15 to 20 years? By 2045, four years of tuition at a local university could cost as much as $800,000 if tuition inflation (TI) rates stay around 7%. In addition to calculating tuition, an annual savings goal for each projected outcome is important to be determined.
To understand possible college costs for Generation Alpha (those born after 2010), it’s important to first establish tuition costs today as a baseline. Three Wisconsin schools serve as examples, and proxies for lower, mid, and upper-tiered tuition costs. The University of Wisconsin-Madison is a great value, and (tuition only) will cost $12,186 for the 2025/2026 school year. Comparative cost for a mid-range school like Carroll University is $39,810, and a pricier/private option like Marquette will run you $52,070.
Using the three schools noted above and current tuition rates, an array of possibilities using different assumed rates of TI and considering the number of years to age 20 (mid-point of college) for each student can be laid out. Data points for 3% TI, the low end of our historical range, 5%, and 7% (the historical average) for the higher-end assumption are considered.
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Sobering Projections
The results are sobering. A newborn hoping to enroll in Marquette, assuming a 5% TI rate, can expect to pay $138,157 annually. At 3% TI, that number drops to $94,044, which is better but still substantial. Even the Madison tuition for the newborn is alarming, with the 5% TI assumption costing $32,333 and the 3% rate driving a $22,009 bill for college. In addition to newborns, the table also provides projected tuition rates for children aged 5, 10, and 15.
The Savings Imperative
Based on projected tuition costs, how much do you need to save to fund higher education for your child/grandchild? The table is built on a relatively modest annual earnings growth of 6%. The annual savings target for a newborn to accumulate $376k at age 20 would be $10,226 per year. The magic of compounding is critical here. If you wait until your child is 10 to start saving, that number more than doubles to $21,236 annually. The Madison annual required savings equivalents are $2,393 for a newborn and $4,970 per year for a 10-year-old: very reasonable by contrast.
Strategies for Affordability
Choosing a relatively inexpensive school like UW-Madison and assuming reasonable tuition increases, most folks wouldn’t consider saving $3k per year a heavy lift for a quality college education. However, suppose your plans include moderate or higher-tiered priced schools, or you factor in TI at 5% or more. In that case, the numbers accelerate rapidly and quickly become a significant financial burden. Marquette’s 4-year tuition for a newborn, factoring in 3% TI, is $376k, or more than three times the cost of a first home back in the ’80s.
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