You’re smart. I just want to say that right off the bat. Asking, “How much should I save for college?” is about the most responsible financial question ever. I respect you for asking this question. So out of respect I’ll do my best to give you a perfect answer.

What I want to tell you is to begin saving money ASAP. The more money, the better. If you don’t use it all for college, you’ll have a cash cushion for life after college. But that’s a stupid answer. It’s not definite. It’s hard to base a goal around “save as much as possible.” I know the word ‘goal’ sounds boring and soul-crushing but rich people have goals so you and I should have goals as well.

College isn’t as expensive as you may think. The news has a way of scaring us with stories about student loan debt being at an all-time high. Disregard that negative talk. I say college is cheap. Why? First off, it’s an excellent investment. It’s probably the best investment you’ll make in your entire life. That degree will pay for itself within the first year after college.

I’ll get down to the details. Here are the many ways college educations get funded:

  • Cold hard cash
  • Grants
  • Scholarships
  • Financial Aid
  • Assistance from friends and family
  • Student loans

Paying for College with Cash

For the 2014-2015 school year, the average cost of tuition and fees for a public in-state school was $9,139, according to CollegeData.com. That’s $4569.50 per semester. This means you could cash roll your education, while in school, if you could earn $51 per day of each semester. Even without savings, cash-flowing college is doable. But you asked about how to save for college, so I’ll give you the answer once I explain why college isn’t as expensive as what you may have been lead to believe.

Paying for College with Grants

Grants are available as private grants, federal grants, grants for special populations and grants from your school. You’re probably thinking that grants come with strings attached. Perhaps you’ll have to teach in a bad neighborhood for a year or perhaps you must join an expedition to Antarctica as soon as you graduate.

While some grants do have strings attached, most are free money. I received several grants in college; they were just given to me – simple as that.

Grants are given based on need. They are meant to bridge the gap between those who can afford college and those who struggle. Since grants are need-based, you must first fill out your FAFSA form. Common grants include the Pell Grant and the TEACH grant. Grants function a lot like student loans – you just don’t have to pay them back! Please, please, please see how much money you can get from grants.

Scholarships

Everyone knows about using scholarships to get money for college. I think the hardest part is finding scholarships that are within reach. I don’t feel comfortable linking to one specific scholarship database so this is a link for all the major scholarship search databases. Quickly go through the list and find whatever search engine you enjoy using most.

Financial Aid

Financial aid is free money. But don’t look down upon free money. It’s given to you by the US government. You are a US citizen, therefore you are part of the US government. Furthermore, financial aid is based on your parents’ income. You aren’t to blame if your parents don’t make much money. There is no need to be ashamed for accepting financial aid. Enjoy it!

There are many, many factors that go into calculating your financial aid so everyone should fill out the FAFSA. If you’re not quite ready to fill it out, you can use a cool tool called the FAFSA4caster. This will help you plan ahead. Nearly all students who fill out the FAFSA receive aid.

Assistance from Friends and Family

Sometimes, if you’re lucky, friends (family friends – don’t expect your broke classmates to pitch in) and family will help you pay for school. If you show them you’re motivated to do well in school, they’ll be more likely to help. Let them know it would be a worthy investment in your future.

Student Loans

There’s nothing wrong with taking student loans. What I actually recommend is to save enough money so you don’t need student loans – but get them anyway. Only accept the federal loans where interest is deferred. Reason being, getting student loans is easy. It’s free money. These federal loans also come with a grace period of 6 or 9 months after graduation. That means the federal government will give you free money for years and years. Why not take it? Place the cash you saved for college in a fairly liquid investment such as a CD, money market account, or just a regular old savings account.

Let me illustrate. Let’s say that after grants, financial aid, scholarships, and assistance from loved ones, you still need to pay $2,000 per semester. Let’s say you take 4 years to graduate. That’s $16,000 you could tuck away instead of spending it right away on college. If you make 2% per year on that money (easy), you will earn $1,140 by using the government’s free money.

Just make sure you keep your cash pile safe. Don’t blow it all on booze and concerts! You don’t want to be asking “How much should I save for college?” twice if you lose your first chunk of change!

Your school’s financial aid office will help you get sorted with your federal student loans. It’s a very easy process (too easy, if you ask me). Private student loans should be avoided if at all possible. They almost always charge interest from day one and the interest is high.

By Doing All of the above, You Won’t Need to Save Much for College

If you hustle, you won’t need to save much for college. But I know this is not useful information as of right now. You still have to fill out the FAFSA (or the FAFSA4caster), apply for grants and scholarships, and see if any of your friends and family will help. So right now I’m going to use some average figures to help determine how much you should save:

Cash: The average American between ages 18 and 22 has $2,000 to their name which could be used for school.

Money given which never needs paid back (grants, federal student aid, gifts from friends and family): For the 2012-2013 school year, $5,750 per year was given on average for students attending a public four-year institution.

Scholarships: The average amount of scholarships given per year per student is $2,500 to $3,000.

Loans: $28,400 per borrower for public and nonprofit schools. Private, for-profit college debt may be lower, it may be higher. However, I can’t provide you with accurate data because it’s not available. Private for-profit schools keep that info secret.

So How Much Should I Save for College?

For the average person, I would say you need to save $25,000. Why? Because that’s about to close as an average cost as I can provide. I believe for most people, it is cheaper to attend a private school although it seems counter-intuitive. I went to a private for-profit school and it cost me $16,000 and some change. I know people who went public and it ended up costing far more. So I’m going with $25,000. That should be your savings goal if you want to have enough cash to easily fund your college education.

Keep in mind that you can take out loans to cover yourself until you’re out of school. So you just need the $25,000 by 6-9 months after graduation in order to never pay a dime in interest on student loans.

To lower the $25k number, do things like skip the expensive college meal plans, rent textbooks instead of buying them, live off-campus when possible, graduate early (I did and believe most anyone can graduate early)… There are tons of ways to save. My advice is to save up $25,000 but your goal should be never to need it all. I know $25k sounds like a lot, but you can do it. I saved $100k by college graduation without extreme effort.

Not long ago I too was asking myself how much I should save for college. I’m happy to help you out. Ask me any questions down below and I will respond. Good luck with college!