Will Our Kids' 529 Be Enough?

My wife asked me a simple question the other day - will our kids’ 529 accounts have enough money in them to pay for their college?

The answer to that question isn’t so simple. There are only really three possible answers: probably, probably not, and the classic it depends. No straight-up yes or no.

To figure this out, I first took into account the current situation: our kids are 6 and 8 years old; each of their 529s currently has a balance of a little over $40k. That leaves 12 and 10 years before the kids would head off to college.

Now for the part that really leads to the it depends answer: how much will college cost? What college or university will they go to? Public, in-state? Private? And will we use any of the 529 money to pay for any of their grade schooling, from now through 12th grade?

To figure out college costs, I looked at two extreme ends: Wright State University - a local, in-state university - and the University of Dayton - also a local university, but private instead. Fortunately for me, both colleges publish estimated tuition costs.

As of this posting, Wright State lists their tuition at $6,085 per semester or $12,170 per year. The University of Dayton lists their tuition at $25,955 per semester or $51,910 per year.

That means, if costs remain fixed, we would need anywhere from $48,680 to $207,960 in the 529 just to cover four years of tuition by the time they start college. We’re pretty close to that first number, but pretty far from the second.

And of course, costs aren’t fixed. I don’t know what the future holds, but thanks to the WayBack Machine, I can look at the tuition web pages above in their previous iterations. Here are the results for Wright State:

The simple average of those seven percent increases is just shy of 3.5%. (So is the value for r when solving the interest equation P * (1 + r) ^ T = F, i.e. 4789 * (1 + r) ^ 7 = 6085). Using 3.5% to project the tuition for Wright State in the years 2036 through 2039 - my son’s potential college freshman through college senior years - and I get $8,583, $8,884, $9,195, and $9,517. Sum those up and multiply them by 2 (since they’re semester costs, and there’s two semesters a year) and I get a total estimated 4-year tuition cost at Wright State for my son of $72,378. If we assume the University of Dayton remains just as much more expensive, percent wise (which may be a bad assumption), in those years as it is this year (that is, about 4.3 times the cost), then the estimated 4-year tuition cost at the University of Dayton for my son would be $309,197.

That means I have ten years to grow his 529 by at least $32,378, but as much as $269,197. That’s an increase of $3,238 to $26,920 per year. Completely feasible for that first number - either by investment growth alone or by our annual contributions - but quite a stretch for the next number.

And if we want to pay for his high school with his 529? Obviously we wouldn’t pay anything if he went to public high school, but my wife wants to send both kids to Chaminade Julienne Catholic High School. I couldn’t find anything about how much tuition is on the high school’s web site (the closest I found was a page called Tuition, Assistance & Scholarships but I didn’t see an amount listed) but a third-party website lists Chaminade Julienne’s yearly tuition at $15,400. That’s will within the legal limit of $20,000 a year allowed. That does mean for four years we’d need an additional $61,600, and we’d need it four years earlier than we’d need the college money. That’s over an additional $10,000 a year growth in the 529.

So it seems the answer to the original question - will our kids’ 529 accounts have enough money in them to pay for their college? - is a solid it depends. If we’re just using it to pay for a lower-cost in-state public university? Probably. If we’re using it to pay for a private high school and a private university? Probably not.