While saving for higher education remains a high priority for many Americans, only two in five (40%) recognize a 529 plan as an education savings tool, according to an annual 529 awareness survey conducted by Edward Jones with Morning Consult, which in its 11th year.
While this is a slight increase from 36% in last year’s survey, 51% of respondents this year said they either didn’t know or could not answer the question. And only 19% of adults were aware 529 plans fund more than just higher education.
This year “National 529 Day”—a celebration of the tax-advantaged savings accounts that can be used to pay for qualified education costs, including college, K-12, and apprenticeship programs which of course is on the 29th day of the fifth month of the year—happens to fall right in the middle of Memorial Day Weekend. That’s not likely going to bring a big awareness boost to a tax-advantaged savings tool that could use some recognition. The survey found 529 plans are only being used by 13% of Americans, an eight-percentage point drop since 2020.
Despite weathering a pandemic and rising inflation, a majority of Americans (55%) surveyed say the current socio-economic conditions in the country have not changed their opinions on the importance of saving for higher education.
“We’re excited to see that Americans’ steady focus on education savings has not waivered despite continued curveballs like inflation and rising costs,” said Steve Rueschhoff, principal, managed investments and insurance at Edward Jones. “That said, Americans are leaving money on the table by not leveraging critical savings strategies such as 529s.”
Americans reconsidering education savings strategies
Among those who are more or less likely to consider changing their future education plans, the cost of higher education (49%) was the primary factor, followed by inflation (37%) and COVID-19 (28%).
According to the College Board, tuition for in-state students attending a four-year public college increased by 1.6% and for students attending a four-year private institution it increased by 2.1% during the 2021-2022 academic year. Among these increases, the top tool Americans are using as part of their education savings strategy is a personal savings account (35%), which saw a five-percentage point jump since 2020 and is significantly more than the mere 13% of Americans that are using 529 plans.
Despite these strategies and tools, nearly half of Americans (45%) say they do not feel like they’re saving enough to cover their future education expenses. Of these, 23% said working with a financial advisor to help guide their financial decisions would help ease their concerns about budgeting for colleges savings.
“Strengthening your overall financial resilience is a critical component to alleviating cost concerns around education expenses,” added Rueschhoff. “Leveraging the knowledge of a financial advisor can help you identify the different approaches for savings for education costs, as well as to understand the trade-offs this may have on your other financial goals.”
The need to find new motivations to save
Despite the national pause on all federal student loan payments over the last two years and the potential college debt forgiveness program, 59% of adults surveyed say these updates have had no impact on their savings patterns. In fact, as Americans think through financial decisions and savings goals over the next five years, only 11% say they will contribute more to higher education savings.
Edward Jones is working to raise awareness for 529 plans and education savings tools through its Financial Fitness program which motivates high school students, clients, and associates to build financial knowledge and confidence. Edward Jones branches across the country are recognizing May 29 as “Save for Education Day,” to aid in the firm’s goal to raise awareness for 529 plans and education savings.
SEE ALSO:
• As ‘529 Day’ Approaches, States Crank Up Much-Needed Awareness Efforts
• Betterment Launches Student Loan Management Tool, Enters 529 Space
• SECURE Act Allows 529 Plans to Repay (Some) Student Loan Debt
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
