529 Plans Are More Flexible, and More Popular, Than Ever Before
By Michael Frerichs, Treasurer of the State of Illinois and Chair of the College Savings Plans Network
October 12, 2021
In 1996, Congress passed bipartisan legislation to help families save for the rising costs of college education through a tax-preferred savings vehicle called a 529 plan, named after section 529 of the Internal Revenue Code. Since that time, 529 plans have evolved into a flexible vehicle that can be used for a wide array of educational expenses. Recognizing this increased value and flexibility, more American families than ever before are opening and saving in a 529 account.
In today’s economy, most young adults must pursue some form of postsecondary education to secure lasting employment – be it an apprenticeship or technical school or a two-year or four-year public or private college. As the diversity of postsecondary educational pathways has evolved, 529 plans have become increasingly flexible. Individuals with a 529 plan can apply the funds toward all major educational expenses – including tuition, fees, room and board, books, computer, internet and student loan payments – at an extensive range of postsecondary educational options – from apprenticeships and technical schools to community colleges and public and private four-year colleges across the country.
The College Savings Plans Network (CSPN) has just released its midyear report, and it’s clear that 529 plans are becoming a very popular college savings vehicle for many families. As of June 30, 2021, there were more than 15.33 million 529 accounts open nationally, a 5% increase from a year earlier and a 20% increase from 5 years earlier.
There aren’t just more families opening a 529 account. New and existing account holders are saving more than ever before. As of June 30, 2021, all 529 account holders nationwide had saved a collective $464.3 billion, an incredible 25% increase since a year prior.
I’d encourage all families to consider opening a 529 account to save for their own or their loved ones’ educational future. You need not be a millionaire to do so. Many plans have no minimum contributions or ongoing account fees. Most plans offer low-cost investment options that cost less than a penny on the dollar. And saving even a small amount can help defray future educational costs. For example, to save $1,000 in a 529 account, you would need to contribute as little as $6.33 a month for 10 years if the investments in the 529 account experience an average annual return of 5%.
To find out more about 529 plans, including your home state’s 529 plan(s), visit https://www.collegesavings.org/529-planning-tools/.
About the Author: Michael Frerichs is Treasurer of the State of Illinois and Chair of the College Savings Plans Network (CSPN). First elected in 2014 and reelected in 2018, Treasurer Frerichs serves as Illinois’ Chief Investment and Banking Officer, with a portfolio of approximately $42 billion. Frerichs serves as Trustee and Administrator of the IL 529 College Savings Plans: Bright Start and Bright Directions. Treasurer Frerichs also launched the Achieving a Better Life Experience (ABLE) program and the Secure Choice retirement savings program. Born and raised in the small farming community of Gifford, Illinois, Frerichs attended Yale University, served in the Illinois State Senate from 2006 – 2014, and currently lives in Champaign, Illinois, with his young daughter, Ella.