Few Families Take Advantage of 529 College Saving Plans

By Catherine Groux
Posted December 14, 2012 10:00 AM

A new study shows few families use 529 college savings plans.
A new study shows few families use 529 college savings plans.
While they can offer many financial benefits, few American families are saving for college with 529 plans, according to a new report by the U.S. Government Accountability Office. In 2010, less than 3% of families used 529 plans or Coverdell Education Savings Accounts. Even among families that considered saving for college a priority, fewer than one in 10 took advantage of one of these plans.

A 529 plan - or "qualified tuition plan" - is a tax-advantaged savings plan sponsored by states, state agencies or educational institutions. Corverdell Education Savings Accounts are similar, but less often used. Both plans are designed to encourage families to begin saving for future college costs.

Given the results of the report, the Government Accountability Office believes that the economic downturn may have affected families' ability to save for college and, therefore, invest in 529 plans. The families who did use these savings plans tended to have about 25 times the median financial assets and three times the median income of those who did not.

While families' financial situations may account for some of the reasons they do not use 529 plans, a May 2012 survey by Edward Jones shows that many Americans simply lack awareness. Today, about 62% of Americans say they do not know what 529 college savings plans are.

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