By Alyson Luszcz and John Mitchell, Co-Chairs, CSPN Data, Operations, and Technology Committee

Every year, a big group from our workplace (or office) gathers for a summertime outing at a Chicago White Sox baseball game. Some of the colleagues who join are baseball fanatics and others could not name one player on the team. Invariably, at least someone is attending the first baseball game in their life. As we talk over beer and peanuts, some colleagues admit to feeling sheepish about how little they know about baseball. As devoted baseball fans, we always tell them there’s nothing to be shy about and remind them that even the most passionate fan has many things left to learn about the game.

As it turns out, we see similar a similar phenomenon among those saving – and not saving – in 529 plans.

Across the broad American population, approximately 10% of households are estimated to be saving in a 529 plan.[1] Interestingly, an additional 23% of the population is estimated to be saving for college in other vehicles such as checking accounts and other tax-preferred accounts.

Why are so many families saving for college in something other than a 529 plan? In a 2022 survey commissioned by the College Savings Plan Network (CSPN), the most common reason families reported saving for college in anything other than a 529 was “unfamiliarity” with 529 plans. Given that nearly 1 in 4 families are saving for college but not in a 529, states and plan administrators have a lot of work to do to help more families understand all the benefits that 529 plans can offer, including tax-preferred growth, state-level tax advantages, professional designed investment options, and much more.

However, just as the most devoted baseball fan has many things left to learn about the game, the same CSPN survey found that approximately 60% of those currently saving in a 529 plan did not know at least one of the following advantages of 529 plans:

  1. Funds saved in a 529 can be used across all states in the US, not just at institutions in a 529 plan’s host state.
  2. 529 plans can be used for traditional 4-year colleges as well as 2-year colleges, graduate school, vocational school, technical school, and apprenticeships.
  3. Money saved in a 529 plan is not forfeited if not used to pay for education.
  4. 529 plans have a small impact on financial aid.
  5. Anyone can open a 529 plan – including parents, aunts, uncles, grandparents, friends, and other loved ones.

Clearly, 529 plans have additional work to do to help their current account holders fully understand the flexibility and benefits associated with 529 plans. The good news is that the survey found that 75% of account holders wanted their plan administrator to provide more information on the cost of college and effective strategies for maximizing savings. 

As a state administrator and private-sector plan manager of 529 plans, we look forward to doing all we can to educate families – from those saving in a 529 plan today to those who have yet to hear about 529 plans – on the full range of advantages that 529 plans can offer.

Alyson Luszcz has over 20 years in the 529 industry and is currently AVP, Advisor-Sold Plan Program Manager at T. Rowe Price.  She serves as Co-Chair of the CSPN Data, Operations, and Technology Committee and is based in Owings Mills, MD.

John Mitchell is Director of College Savings at the Illinois State Treasurer’s Office, where he oversees Illinois’ two 529 college savings plans: Bright Start Direct-Sold and Bright Directions Advisor-Guided. He serves as Co-Chair of the CSPN Data, Operations, and Technology Committee and is based in Chicago, IL.

[1] All statistics referenced in this blog post are taken from the CSPN National Survey of College Savers, released in May 2023 by the College Savings Plan Network. The survey was a nationally representative sample of more than 35,000 respondents. A public version of the report is forthcoming.