Even with the market volatility, Joel Dickson, global head of advice methodology at Vanguard, said the fundamental value of 529s as a tax-advantaged way to save for education had not changed.
“It still makes a lot of sense,” he said.
At Edward Jones, the annual survey shows that while respondents want to save for college, two out of three don’t know what a 529 plan is, said Steve Rueschhoff, principal of managed investments at the company.
Overall 529 plan assets, reflecting deposits and investment gains, reached almost $409 billion in the first quarter of this year — down from $432 billion a year earlier but up more than 5 percent from $388 billion at the end of 2022.
Despite the recent market fluctuations, 529 plans offer a way for families to reduce the amount they have to borrow for college, Ms. Biar said. The College Board estimates that the average annual in-state cost of attending a four-year public college is $27,940, while the cost at a four-year private nonprofit college is $57,570.
“We still want people to consider a 529,” Ms. Biar said, adding that most plans have conservative options, including savings accounts that are federally insured, for people who can’t tolerate risk.
The College Savings Plans Network has been working to expand awareness of the college savings plans and has encouraged legislation that broadens the allowable uses for 529 funds. Congress, for instance, has expanded the permissible use of 529 funds to allow families to save for educational expenses other than college costs, like tuition for kindergarten through Grade 12, as well as for apprenticeships. Plus, up to $10,000 from a 529 can now be used to repay student loans.
Starting next year, under the Secure 2.0 Act enacted in 2022, “leftover” funds in a 529 plan can be rolled over into a Roth individual retirement account for the 529’s beneficiary. This is helpful, Ms. Lucina said, because some families may balk at contributing to a 529 out of fear that they will owe taxes and a penalty if they have not spent all the funds in the account — say, because their child doesn’t go to college — and they withdraw the money for other purposes.
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