By Michael Frerichs, Illinois State Treasurer & CSPN Chairman
October 13, 2020
In 2020, families have faced incredible challenges and constant uncertainty — including a pandemic, historic unemployment levels, a stock market swoon, remote learning, and social distancing.
Despite the challenges, families have continued to save for college. According to ISS Market Intelligence, in the first half of 2020, families invested a net total of $6.7 billion in their 529 plans (the total amount contributed to 529 accounts minus the amount withdrawn), an increase of roughly $800 million over the same period in 2019. According to the midyear data collected by the College Savings Plans Network (CSPN), these new contributions brought the total level of national savings to $373.5 billion across 14.56 million 529 accounts.
As I’ve shared with families in Illinois and with colleagues across the country, I think families are making a smart choice to continue saving for their children’s educational future. Despite the current landscape, educational attainment will almost certainly remain a key predictor of socioeconomic mobility, health outcomes and life satisfaction.
Furthermore, the current economic challenges are likely to make college even more important and perhaps more expensive in the future. After the 2008 Great Recession, job losses were largely borne by workers without a college education. High unemployment in the years after the 2008 crisis led to a surge in students pursuing higher education. Encouragingly, college graduation rates also increased, including for the historically most-disadvantaged groups. Less encouragingly, the price of college also continued to rise in the years after the Great Recession.
Given our experience in the Great Recession, we should expect future demand for higher education to continue to climb. Hopefully, that demand will come from an even more diverse group of students. If the past crisis is any guide, we should expect higher education to become even more important and, likely, even more expensive.
In my role as Illinois State Treasurer, I’m the fiduciary of Bright Start, Illinois’ direct-sold 529 College Savings plan. In my role as the proud father of a young daughter, I’m also a Bright Start saver and investor. Amid these trying times, I’m focusing on what I can control — including my own savings for my daughter’s educational future. Although 2020 may be plagued by difficulties, college will remain an important future step for my daughter and for millions of others. The continued growth in 529 savings accounts and contributions demonstrates that American families, as best they can, are continuing to save to help their children realize their educational dreams.
About the Author
Michael Frerichs was elected Illinois State Treasurer in 2014 and re-elected in 2018. He serves as the state’s Chief Investment and Banking Officer, with a total portfolio of approximately $35 billion, and serves as fiduciary of Bright Start and Bright Directions, Illinois’ highly rated 529 College Savings plans. Under Treasurer Frerichs’ leadership, Illinois launched multiple new programs to help families achieve the American Dream, including Illinois ABLE and the Secure Choice retirement savings program. Born and raised in the small farming community of Gifford, Illinois, Treasurer Frerichs graduated from Yale University and was the first in his family to attend college. He resides in Champaign with his young daughter, Ella.