Paying for Your Child's College Education: A Timeline

If you haven’t started saving, here’s a list of reminders and strategies to consider as the years go by.

If you haven’t started saving, here’s a list of reminders and strategies to consider as the years go by

Interest rates on student loans have seen many changes over the last decade and a half.

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Earlier this year, the Federal Advisory Council, a group of bankers that advise the Federal Reserve's Board of Governors, warned that the growth in student loan debt has "parallels to the housing crisis."

Housing has rebounded, but student loan debt doesn't seem poised for the same fate. The average cost to attend an in-state public college for the 2012-2013 academic year was $22,261, and that doesn't include housing, meals and various fees. And that's just one year – multiply it by the traditional four years of college, and you get $89,044. If you have two kids, multiply that four-year degree by two ($178,088), and you can see how parents can spend almost two decades struggling to save up for college, and when they can't, how their kids can spend years paying back loans.

Obviously, saving money earlier rather than later is the key to successfully paying for college. So if you haven't started saving, or if you're having a baby and wondering how to pay for your future college graduate's education, here's a timeline of reminders and strategies to consider as the years go by.

For those who are expecting a baby, or if your baby just arrived...

The situation ahead: You have 18 years before your little one goes to college, so if you're thinking about paying for college along with cribs, smart move. In Kal Chany's book, "Paying for College Without Going Broke," published last year with a forward written by former President Bill Clinton, Chany looked at inflation rates and concluded that by 2030 – when a newborn today will be 17 and applying for college – the average price for a state university will probably be $41,228 a year. The average price for a private university: $130,428 a year.

[Quiz: Are You Spending Too Much on Your Children?]

What you should be doing right now: "Set up a 529 plan, and save as much as you can," urges Kevin Michaelsen, director of financial assistance at Meredith College in Raleigh, N.C. "Encourage grandparents and relatives to start saving in separate 529 plans too."

The 529 is attractive because the money in the account accumulates, tax-deferred, and no income tax is taken when the funds are withdrawn, providing the expenses are actually for college (i.e., tuition, fees and supplies).

More to consider: You can find and put money into these 529 plans with a few clicks on a computer. One of the best directories is, where you can see if your state offers a state income-tax deduction or income-tax credit on your contributions (49 states and the District of Columbia have 529 plans; Wyoming doesn't). You can put your money in any state's 529.

There are other college saving vehicles such as the Coverdell Education Savings Account, which allows no more than $2,000 a year to be contributed to the account. Still, the 529 is by far the most popular way to save for college.

If your child is 6 years old...

The situation ahead: Age 6 is arbitrary; the larger point is that one-third of your time to save for your child's college education has passed. Still, you have 12 years – no need to panic.

What you should be doing right now: "Really, all the things you do for a newborn versus an older child, it's all the sort of same things you would do when they're younger, but you have a shorter time horizon, so you need to put more away," advises Richard Polimeni, the director of education savings programs at Bank of America Merrill Lynch, the corporate and investment banking division of Bank of America.

In other words, if you haven't opened a 529, this would be a good time.

More to consider: If you have been socking away money into a 529, but feel you should put away more, Michaelsen suggests: "Since your student is at school-age now, try to save the amount you paid for preschool or day care expenses, and put that in the plan."

[Read: 4 Ways to Encourage Children to Save for College.]

If your child is 12 years old...

The situation ahead: You only have six years to save for your child's college education. It isn't too late, even if your child is a bit older than 12, but the older he or she gets, "the advantage of tax-deferred growth in these savings is diminished," says Rick Scott, an associate professor of finance at Saint Leo University's Donald R. Tapia School of Business in Saint Leo, Fla.