The number of 529 accounts designed to help families save for the cost of higher education has surpassed 16 million for the first time, according to the College Savings Plans Network.
About $411 billion has been saved in 529 plans and 38% of accounts are currently accumulating automatic contributions, the Washington DC-based clearinghouse and 529 advocate said Thursday.
Created over 20 years ago in the Internal Revenue Code, Section 529 was designed to help families to save for the cost of higher education.
“These statistics assure us that families trust 529 savings plans as a responsible and effective savings vehicle for educational expenses, and they are demonstrating that trust by opening new college savings accounts and continuing to contribute to their existing accounts,” said Rachel Biar, College Savings Plans Network (CSPN) chair and Nebraska assistant state treasurer, in a statement.
Consumer investment into 529s for future college payments comes as the nation continues to grapple with huge student loan bills that some research shows is weighing on people’s ability to save for retirement and feel financially secure. This week the Supreme Court is considering whether to strike down a moratorium on student loan payments being advocated for by President Joe Biden’s administration, with some analysts saying the end to that relief is likely.
The record high number of accounts indicates people are increasingly invested in higher education, a trend that may be helped along by SECURE 2.0 provisions that go into effect in 2024. Next year, the legislation makes it possible for 529 savers to invest that money into Roth IRAs if it isn’t used for educational purposes.
Meanwhile, SECURE 2.0 seeks to address student loan debt head on by allowing for company’s to make company matches in retirement plans for people paying off student loan debt.
Some employers already provide student loan reimbursement as a benefit. Companies including Staples, Live Nation, Hulu, and Google all offer some version of student loan payment assistance. Last week, Candidly announced a partnership with American Eagle Outfitters to offer employees who have been with the company for at least two years a monthly, tax-free student loan contribution. So far, Candidly said it has facilitated more than $100,000 in contributions to associates’ student loan debt.
This type of service may become more prevalent as companies seek to provide benefits that help with student loan payment. Through Candidly’s financial wellness program, employees can find best-priced borrowing options, prepare and pay for college, as well as explore forgiveness and federal student debt savings programs
“By directly addressing student debt within the workplace, AEO is recognizing the full spectrum of financial health and wellness across their associate population,” said Laurel Taylor, CEO and founder of Candidly, in a statement. “As partners, we are thrilled to serve and create greater financial freedom for their associates while positioning AEO as a highly attractive employer for college students and graduates.”
If the Supreme Court decides to end the student loan forgiveness program than payments will need to resume this summer. Opponents of the plan say the White House should not have the authority to grant 400 million borrowers with debt forgiveness.
Regardless of how the court rules, the student loan pause, implemented during the start of the pandemic, will come to an end. Americans will have to be ready to make payments on their education loans, which may be increasingly difficult in the current inflationary environment, according to experts.
Full-time and part-time AEO associates based in the US, working across corporate offices, distribution centers and retail stores, are entitled to Candidly’s core offerings.
“At AEO, our people come first and we are committed to providing associates the tools and resources they need to meet their personal financial health and wellness goals,” said Jessica Catanese, SVP of total rewards at AEO Inc, in a statement. “Our partnership with Candidly has been well-received, and we are thrilled to reach this major milestone in helping our associates repay more than $100,000 of outstanding student loans.”