Few Use 529 Savings Plans
January 28, 2013
Section 529 plans, managed by states, allow after-tax dollars to be placed into an account where earnings accumulate tax-deferred. Withdrawals used to pay for qualified higher education expenses are not taxed. Last December, the Government Accountability Office (GAO) published a report examining the efficacy of 529 plans. The data GAO used combines 529 plans and Coverdell Education Savings Accounts.
As of July 2012, there were more than 100 of these savings plans, with assets totaling $167 billion. Just 3 percent of all families in the United States use these savings plans, though of the 25 percent of families who said they expected major education expenses in 5-10 years, about 7 percent had 529 plans or Coverdells. Most families with 529 plans or Coverdells were significantly wealthier than those without the accounts. "The median financial asset value for families with 529 plans or Coverdells was about $413,500, which is about twenty-five times the median financial asset value for families without 529 plans or Coverdells," the report explains.
The report details federal requirements for the plans, the operation and features of the plans, and required disclosures for plans sold through broker-dealers, not the states. GAO's report then highlights plan features and other factors that affect participation in 529 plans, including tax benefits, fees, and investment options. Some states, though, have adopted strategies to address barriers to participation, such as matching programs, low or no minimum initial contributions, and low-risk investment options. Finally, the report examines the extent to which savings in 529 plans affect financial aid awards.
Senior Policy Analyst
- Associations Respond to DACA and DREAM Act Concerns
- Congress Makes Changes to GI Bill Education Benefits
- CFPB Report Criticizes Campus Banking Agreements
- 2017 Intermediate Accounting and Reporting - Winter
January 23-24, 2017
- 2017 Endowment and Debt Management Forum
February 1-3, 2017
- WEBCAST: NACUBO Live! Results of the 2016 NACUBO-Commonfund Study of Endowments
Thursday, February 2, 2017 9:15AM ET
- WEBCAST: Compliance Challenges for the New EPA Hazardous Waste Rule
Tuesday, February 7, 2017 1:00PM ET
- ON-DEMAND: The ROI of Student Success: Practical Considerations for Measuring and Conveying the Financial Value of Student Support Services
- ON-DEMAND: The CBO's Role in Diversity and Inclusion on Campus