It’s May 29, which means it’s “529 Day,” or more formally, National 529 College Savings Plan Day—a new initiative from state governments and investment firms hoping to capitalize on the date-related awareness potential enjoyed by marijuana enthusiasts on 4/20 and May 4 (“May the Fourth be With You”) for Star Wars fans.
Because counting on a billionaire like Robert Smith to eliminate the student debt of an entire class of college graduates (as he did at Morehouse College in Atlanta during his commencement keynote this May) seems like a risky proposition, raising public awareness of 529 plans is a solid enough idea.
Backers of 529 Day intend to dedicate it to raising awareness about, and promoting the importance of, college savings as tuition continues to climb and student loan debt hamstrings the ability of younger workers to begin saving for retirement.
Some states are running special incentives and promotions tied to 529 Day, including Vermont. Lucky babies born May 29 in the Green Mountain State will receive $100 deposit into its 529 college savings account, opened for the child by the Vermont Student Assistance Corp.
During the entire month of May, any Vermont resident or Vermont Higher Education Investment Plan (VHEIP) account owner can enter a drawing for a chance at a $529 deposit into a new or existing VHEIP college savings account.
“College savings accounts are clearly a powerful tool,” said Scott Giles, president and CEO of VSAC. “We want to encourage parents to open a VHEIP account and get started early to save for college and other career training. The ideal time to begin saving is between birth and age 5 in order to allow your investment to build over time.”
According to VSAC, children with 529 plans are three times more likely to attend college, and four times more likely to graduate, compared to children without accounts.
Over in North Carolina, the College Foundation of North Carolina (CFNC) is offering state 529 account holders the opportunity to win a $5,529 deposit into their account by registering for a drawing. They can receive multiple entries by taking steps to increase their 529 plan funding like setting up a new recurring contribution by automatic draft or payroll deduction; increasing a current recurring contribution by at least $25 per account; for making a first contribution to a new account; or for each contribution made to an account (even if it is made by friends or family).
To mark 529 Day in Virginia, the Virginia-based college savings plan is offering to pay two years of college tuition to winners in Virginia529’s “Plan 4 the Future” Sweepstakes.
To qualify, people can open a new Invest529 account by Friday, May 31, and establish a recurring bank debit of at least $25 by July 1, 2019.
529 plans still have an identity problem
A May 24 article in The New York Times noted the number of 529 accounts grew 30% from 2010 to 2017 to about 13 million, citing a Pew Charitable Trusts survey. The average balance in the accounts was about $23,000 at the end of 2018.
But while they may be gaining some traction, research from the College Savings Plans Network shows just a third of Americans have heard of 529 plans and only a quarter know that their purpose is to save for education.
A recent study by Edward Jones found the number of Americans who do not recognize a 529 plan as an education savings tool has risen to 67%—a 5 percentage point increase from 2012, the year the survey was first commissioned. Of those who correctly identified a 529 plan as an education savings vehicle, almost half (48%) were unaware it can be used to pay for qualified K-12 tuition expenses; 50% of parents with children in the household younger than 18 said the same.
“It’s concerning to see that in nearly a decade, the number of individuals who do not understand or know what a 529 plan is has increased,” said Tim Burke, an Edward Jones Principal. “What’s more alarming is that parents with young children, those who stand to benefit the most from this type of savings plan, are not aware of its many advantages, not just for college, but for K-12 education expenses as well.”
More than 30 states offer a state tax deduction for people who fund a 529 plan in one of those states.
SECURE Act could impact 529 plans
The SECURE Act, which was passed by the House last week and is now in the hands of the Senate, would allow savers to take a distribution of up to $10,000 from a 529 plan to pay down student loans. The proposed legislation would also allow savers to use their 529 funds to pay for fees, books and supplies in a registered apprenticeship program.
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.
