by Mark Askeda

Created on: August 11, 2009

A college education is a worthwhile goal that is shared by many people. However, higher education costs are increasing at a pace that far exceeds general inflation rate. According to The Bureau of Labor Statistics, over the past 50 years, the cost of a college education has increased at 6.5% annually. The inflation rate during that period averaged 3.4%. At first glance, the difference may seem relatively small, but in terms of dollars, the spread can be enormous. For example, $1,000 compounded at the average inflation rate of 3.4% grows to $5,200 over 50 years. At 6.5%, the same $1,000 grows to $22,900.

This alarming trend has shown no sign of stopping. The increase in college costs over the last ten years has exceeded that of inflation by a large margin as well. Clearly, college is becoming an expensive proposition.

However, the value of a college education has never been greater. The average college graduate earns approximately 82% more than the high school graduate. Over a lifetime, a college graduate will easily earn enough income to pay for the high cost of college many times over. Estimates place the lifetime earnings difference at almost one million dollars.

Fortunately, not everything is as bad as the inflation rates seem to indicate. When higher education costs are computed, the Bureau of Labor Statistics uses the list price. Very few students pay the full list price for their college educations. Almost everyone receives at least some level of financial aid. Many sources are available to the average student. Academic scholarships, athletic scholarships, military aid and need based aid are all common ways to reduce the burden of college tuition. Make sure you apply for financial aid and be persistent. Negotiate firmly with the financial aid officer and perhaps you will be able to get a better deal.

Another way to reduce the cost of higher education is to take advantage of community colleges. Many students spend their first two years at a much lower priced community college before completing their educations at the higher priced universities. This strategy significantly reduces the financial strain of a college education.

The government is fully aware of the trend in college expenses and has developed programs to assist. The tax code has several provisions that can help. The Coverdell ESA and the 529 plans are excellent ways that the IRS helps you to accumulate money to pay for college. The IRS also allows you to take tax credits totaling up to $2,500 annually to help defray the costs.

Clearly, paying for higher education puts significant strains on many families' finances. The continued increases in college costs show no signs of decreasing, so the average family needs to be creative and aggressive in planning for this major expense.

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