529 Plan: Breaking Down the Numbers
College tuition costs have skyrocketed, with public colleges charging an average of $9,834 and private nonprofit colleges costing $40,713 in the 2022-2023 school year, according to the Department of Education. To offset these expenses, families have turned to 529 plans, which saw their value increase from $105 billion in 2008 to roughly $508 billion by 2024.
This popular tax-advantaged investment account can be used for various education expenses, and there are two types: prepaid tuition plans and savings plans. While prepaid tuition plans allow you to pay for tuition at a specific college or university ahead of time, savings plans offer more flexibility as they allow investing in various funds.
The average amount contributed to a 529 plan is $2,438, which represents about 9% of the overall cost of attendance, according to Sallie Mae. Higher-income households contribute significantly more than lower-income households, with families making over $150,000 contributing an average of $5,147. However, data on average contribution amounts by race and ethnicity is not readily available.
The popularity and value of 529 plans have skyrocketed, with total assets invested reaching $509 billion by 2024 and the average account balance growing from $9,500 to $30,300. While 95% of 529 accounts are savings plans, the more restrictive prepaid tuition plans account for 5% of assets and accounts. Virginia leads the country in 529 plan popularity, with nearly 3 million active accounts and around $105 billion invested.
Picking the right 529 plan can be overwhelming, with over 100 plans available. Our website provides a list of best plans for various situations, such as those looking for the largest returns or more diversified funds. Opening a 529 plan is a smart way to save for your child's future education, and careful consideration can help you find the plan that fits your needs.
- [1] "College Trends," National Center for Education Statistics, 2023.
- [2] "529 Plans," IRS, 2023.
- [3] "How College Savings Plans Work," Investment Company Institute, 2023.
- [4] "529 Plans: An Overview," Congressional Research Service, 2023.
Research indicates that families have turned to 529 plans to finance their children's education, with the value of these accounts increasing significantly from $105 billion in 2008 to $508 billion by 2024. Furthermore, finance experts recommend conducting thorough research on various 529 plans before making a decision, as there are over 100 plans available with different investment options and returns.
