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.
- ED Tightens New "Gainful Employment" Rules
- GASB Studies Irrevocable Charitable Trusts
- ED Negotiations Focus on Cash Management
- 2014 Higher Education Accounting Forum
April 27-29, 2014
- ON-DEMAND: Understanding the Results of the 2013 NACUBO-Commonfund Study of Endowments, and a Look to 2014 and Beyond
- ON-DEMAND: How Behavioral Changes Helped Cut Energy Usage in Half
- ON-DEMAND: Developing a Market-Informed Approach to Tuition Pricing
- ON-DEMAND: Responsibility Center Management: The Process Necessary to Complete a Successful Implementation
- ON-DEMAND: OD: Responsibility Center Management: How Innovations Have Changed the Nature of RCM
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis