In its third year monitoring tax-advantaged college savings awareness, the survey found that only 30% of Americans could correctly identify a 529 plan as a college savings tool from among four potential options, down from 37% during the inaugural 2012 survey.
Greg Dosmann, a principal with Edward Jones, says the substantial reversal is surprising considering the average cost of tuition continues to rise. He points to a recent survey of college pricing from the College Board, which shows that a “moderate” annual college budget for an in-state school for the 2013/2014 academic year averaged $22,826. A moderate budget at a private college averaged $44,750.
“It seems counterintuitive that the costs of higher education continue to rise while awareness for a vehicle than can make this cost more manageable continues to decline,” Dosmann says. “We like to remind our clients that starting a 529 plan savings program as early as possible will help ease the burden as children near college age.”
Significant dips in awareness occurred regionally, especially in the Northeast (39% awareness in 2014, down from 45% in 2013). The Midwest fell to 30% awareness in 2014, down from 36% in 2013. A notable decline in 529 plan awareness also occurred limiting the sample to mid-income households; among those respondents with a household income between $50,000 and $75,000, awareness dropped from 42% in 2013 to 32% today.
Dosmann says age also seems to play a significant role in awareness level, with those between ages 35 and 54 expressing the highest levels of knowledge about 529 plans. Interestingly, respondents 65 and older showed the lowest levels of awareness, with just 18% saying they knew what 529 plans were. This despite the fact that 529 plans were, Dosmann notes, originally designed so that grandparents and others parties could contribute to college costs.
“Grandparents represent an opportunity when it comes to managing the cost of college,” Dosmann adds. “We recommend that parents look at tackling college savings as a larger family goal, when possible. Talking to grandparents about participating in 529 plans is an excellent way to build assets in a portfolio—and for the grandparents, it's fulfilling and there may be tax advantages as well.”
As part of its effort to raise awareness for 529 plans and college savings techniques, Edward Jones branches across the U.S. are recognizing May 29 as "Save for Education Day.” Branches will be hosting events to educate families about the importance of setting and pursuing education savings goals.
Families are encouraged to contact their local branches to learn more about planning for their children's educational future. More information is also available here.