education savings plan

Luke and Jen want to begin funding an education savings plan for Diane (age 2) beginning on Jan 1 2019, fully funding her college education that will commence in Sept 2034. Her expected graduation date is May 2038. They want to complete funding by her date of matriculation. (see attachment)

The current total cost of college in today’s dollars is $30,000. Create a plan that assumes they save annually with a lump sum contribution for the year on Jan 1 of each year from 2019 thru 2033.

Assumptions:

Rate of return on college savings = 6%

Tuition inflation = 4%

After completing your spreadsheet ( please do the calculation in new tab in the excel attach file and update ( SOFP & SOCF ) tabs ,

then answer the following questions:

  • What is the cost of education for Diane’s freshman year?
  • What is the total future cost of her education?
  • How much should Luke and Jen have saved at the end of 2033 to fully fund her education through 2038?
  • How much annual savings is need to meet the savings goal?
  • Use the Fisher equation to determine the real rate of return on the college savings plan.

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