Final answer:
The Courters need to save for their son's college education at UC Berkeley, with costs expected to be $165,000 over 5 years. The increase in college expenses noted by the Bureau of Labor Statistics illustrates the importance of early financial planning due to tuition rising faster than median household incomes. With student loan debt at over $1.3 trillion, strategic saving is essential.
Step-by-step explanation:
The Courters are looking to save for their son's college education at UC Berkeley, with an estimated annual cost of $33,000 over five years, totaling $165,000. They have 16 years to accumulate this amount. Financial planning for college is a critical subject, especially considering that the cost of attending college has been steadily increasing. For example, statistics show a significant rise in tuition and associated costs over recent decades, which surpasses the rate of inflation in many cases.
According to the Bureau of Labor Statistics, from 1980 to 2020, there was more than a 12-fold increase in average tuition and fees for a 4-year public university. Meanwhile, the median yearly household income only increased about 3.5 times. Moreover, the cost for public four-year colleges has increased by a factor of almost 2.5 between the 2000-2001 academic year and the 2019-2020 academic year. The implication of this trend is that families must plan more strategically for college expenses, as even full-time employment at minimum wage may fall short of the funds required.
Student loan debt has also reached new heights, topping $1.3 trillion due to the surge in education costs. Therefore, starting an annuity or other savings plan well in advance is essential to manage these increasing expenses for higher education.