Benjamin Franklin once said that “an investment in knowledge pays the best interest.” As many high school seniors prepare to make their final college decisions, families face one of the most significant money commitments of their lives. Paying for higher education is not only expensive but also involves complex choices about future jobs, quality of life, and financial freedom. With good planning and the right approach, families can make these decisions wisely, weighing current costs against future benefits.
Higher education still offers significant economic benefits
When making education decisions, it’s important to separate the cost of college from the value it provides. College prices have risen dramatically, but evidence shows higher education still brings substantial lifetime benefits. Since these benefits vary greatly depending on the school and major chosen, careful thinking and financial planning are necessary.
College costs have grown faster than regular price increases (inflation) over the past 40 years. According to the College Board’s latest report, the average cost for the 2024-2025 school year reached $58,600 yearly for private four-year colleges and $24,920 for public universities for in-state students (both figures include room and board).
This rapid increase comes from several factors including less state money for public universities, more campus facilities, higher administrative costs, and investments in technology. Since the pandemic, these trends have sped up with spending on hybrid learning options and improved campus health measures. The current political situation also creates uncertainty about government funding for education.
Understanding these trends matters for all families planning for college, whether for immediate enrollment or long-term planning. Generally, starting to save earlier allows for better planning and may reduce the need for student loans that can burden graduates for many years after finishing school.
Some students wonder if college is still worth the cost. While the answer varies for each person, data consistently shows that higher education continues to provide significant money advantages.
According to recent information from the Bureau of Labor Statistics, the unemployment rate for those with a bachelor’s degree was just 2.5% in 2024, compared to 4.2% for those with only a high school diploma. Similarly, average yearly earnings for college graduates reached $77,150, much higher than the $46,500 for high school graduates. For those with master’s, professional, and doctoral degrees, the unemployment rate is even lower and yearly earnings are higher. These earnings differences add up over a lifetime as college graduates earn more throughout their careers.
Different majors can lead to significantly different outcomes
While these numbers are impressive, they don’t tell the whole story since results can vary greatly based on field of study, school attended, and how well students turn their education into career opportunities.
When looking at the financial return on education, the choice of major plays a crucial role. The accompanying chart shows median yearly earnings for professionals between ages 25 and 64 with bachelor’s degrees. STEM fields (Science, Technology, Engineering, and Mathematics) consistently show the strongest returns, with some fields showing median yearly earnings exceeding $100,000. Engineering and computer science majors lead in earning potential, while healthcare and business fields also show strong returns.
In contrast, fields in the humanities and education typically offer lower median earnings. Of course, there are many benefits to higher education beyond money, and graduates can take many paths with these degrees. These numbers don’t reduce the importance of these fields but highlight the need for careful financial planning when pursuing these paths.
Alternative education paths are worth considering too. Technical certifications, two-year associate degrees, and apprenticeship programs can offer focused skill development at lower costs, sometimes with job outcomes comparable to or better than some four-year degrees. These options may be practical alternatives for certain students or complement traditional degree programs.
Education savings options and strategies offer planning flexibility
Ideally, creating a plan to pay for college happens long before you know what kind of education your child, grandchild, or other family member will want. But even for those close to college acceptance, using the right savings options and strategies can help.
529 plans remain the foundation of most education funding strategies. These are special savings accounts that offer tax-free growth and withdrawals when used for qualified education expenses. Recent law changes have made them more flexible, allowing limited transfers to retirement accounts and use for apprenticeship programs and student loan repayments. Many states also offer tax benefits for contributions, making them more attractive.
UGMA/UTMA accounts (which stands for “Uniform Gifts/Transfers to Minors Act”) provide alternatives that allow for greater flexibility in how the money can eventually be used. While they don’t have the tax advantages of 529 plans, these accounts allow more flexibility in how the money is used while removing substantial assets from taxable estates.
For families with the means to do so, direct tuition payments to schools can offer a powerful exception to gift tax limits. This is because payments made directly to educational institutions for tuition expenses are exempt from gift taxes, no matter the amount. This special provision in the tax code allows grandparents or other family members to contribute significantly to a loved one’s education without using any portion of their lifetime gift and estate tax exemption or annual gift tax exclusion.
Other approaches, such as specialized trust structures, can help as well. For instance, education trusts give donors more control over how money is used for college costs. You can set up rules about grades, choice of schools, or even extend benefits to future generations. These trusts can also help reduce taxes while supporting your family’s education values.
It’s important to connect any college savings plan with your overall money plan. Tax rules for education savings change over time, so staying up-to-date is critical. Working with a financial advisor can help you make the best choices for your family’s education goals in the current environment.
The bottom line? College planning requires balancing today’s costs against future benefits. By starting early and choosing the most appropriate savings options for your situation, families can make choices that support future educational and financial success.
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