A new report surveys the current status of 529 College Savings Plan across the country.
According to a new survey, in 2021, American families received $464 million in tax savings and other higher education benefits tied to their participation in a 529 College Savings Plan. That’s one of the highlights of a report entitled Building Savings and Aspirations for College Success: A report for CSPN on the results of a national survey of state 529 plans, just released by the College Savings Plans Network (CSPN).
The report, based on responses by 94% of states offering a 529 plan, provides a comprehensive review of efforts by 529 plans to help families save through a range of mechanisms – offering financial incentives and matches, removing barriers to saving, lowering account fees, providing tax savings, and establishing innovative partnerships with nonprofits and universities.
What is a 529 College Savings Account?
Formally called “Qualified Tuition Programs” as defined in Section 529 of the Internal Revenue Code, 529 plans help families save for a beneficiary’s (typically one’s child or grandchild) future higher education expenses. In some states, K-12 and certain technical and career college programs are also covered.
The growth of savings in 529 plans, which are administered by state agencies, are not subject to federal income tax, and withdrawals remain tax-free when used for qualified education expenses. In addition to the federal tax advantages, many states offer state tax-deferred growth and tax-free withdrawals for qualified education expenses. Currently, 529 plans are offered in 49 states and the District of Columbia.
“529 College Savings Plans are intended to support families in meeting the ongoing rising costs of higher education. Between retirement savings and paying off pre-existing debt, it may seem difficult to prioritize college savings. However, college savings efforts do not need to come at the expense of your everyday budget,” said Rachel Biar, Chair of CSPN and Assistant State Treasurer of Nebraska.
She added, “Our comprehensive report shows that 529 plans are providing incentives and are committed to educating all families about the advantages and accessibility of 529 plans for all Americans. As we continue our work, it is my hope that families across our nation continuously engage in these important conversations and take advantage of all the resources available to help them pave the path towards achieving their higher education goals.”
Other Findings
- In 2021, state plans and their partners provided almost $42 million in matching grants, initial deposits, and other financial incentives to lower-income families, first-time savers, and others to help more families start their educational savings.
- Partner organizations including higher education institutions and nonprofit children’s savings or college access programs made more than $7.3 million in contributions to 529 accounts and provided another $217 million in tuition discounts to 529 savers in 2021.
- Programs are taking additional steps to make it easier for families to start 529 plans, including low or no minimum initial deposit limits, multiple ways to make deposits, writing 529 plan materials in multiple languages, and offering financial education. Every state surveyed in the new report had instituted one or more efforts to make it easier for families to save in or open 529 accounts.
According to the most recent program data, there are more than 15.9 million 529 accounts across all the states, with more than $387 million in total assets under management, about triple the amount in 2009. The average account has increased in value from $13,188 in 2009 to $25,903 in 2022.
