A New Trend in 529 College Savings Plans

Dear College Made Simple reader,

Here at College Made Simple, we try to provide you insight into the best ways to save and pay for college. We don’t spend a lot of time worrying about outside forces; we focus on things a family and student can do to make college more easily affordable.

That said, there are a few big developments taking place in the way people pay for college. They very well may affect you. So, today, we’re going to examine these large-scale changes – and what they could mean for your college savings plans.

-Scott

A New Trend in 529 College Savings Plans

According to a recent CNBC.com report, for only the second time ever, families are taking more money out of 529 savings plans then they’re putting in.

This would seem like a small blip… except the first time it ever happened was just recently as well.

The reasoning is simple enough. The economy remains weak… fewer people feel secure in their jobs, so savings are going towards more immediate concerns and more liquid accounts… and a number of families are reconsidering how much they’re willing to spend on college.

In just the last year, family contributions dropped to 37% of tuition, from 47% last year.

All of these are big factors – but the biggest is probably faith in the markets.

Plenty of families got burned by the market crash in 2008. And, while the Dow and S&P have rebounded a bit, keep in mind that – over the past decade, investments in stocks have been flat. Over the past five years, investments in stocks have lost money.

Considering 529s are very heavily invested in stocks – and that the life span of a 529 tends to be short and finite, ending when children go to college – people are without question looking at other sources of savings and growth. People want certainty when saving and paying for college – they don’t want to take the unnecessary risk that doesn’t seem to pay off anymore..

This isn’t to say that you should completely abandon 529s (However, I, personally, don’t want my college savings tied up and placed in the stock market), as they do have some advantages – such as tax-free withdrawals of gains for education purposes and state tax breaks for contributions (on some plans).

But it’s wise to know all your options. You’ll have to decide if you want your college savings at risk… or do you want to know with certainty it’ll be there when you need it to be? Do you want the money to be liquid in case opportunities or emergencies arise… or do you want it tied up? Do you care if it counts against you for financial aid… or would you rather it be protected from the financial aid formulas? These are all things you need to ask yourself.

There are a number of options available to you – but the most important part is to figure out your best course of action as soon as humanly possible. College will be here before you know it… and you want to make sure you’re on the right path well before you apply for college aid.

To your college funding & admissions success,

Scott Weingold

Co-Founder, College Planning Network LLC

Publisher, CollegeMadeSimple.com – The free educational resource of College Planning Network

 

Related Articles:

Why 529 Plans Aren’t Working for Families with College-bound kids

How to Opt Out of 529 College Savings Plans

 

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Editor's Note: Scott Weingold has been ranked the #1 “College Financial Aid Expert Worth Knowing About” in the entire country by CollegeStats.org.  He has co-authored the book, “The Real Secret To Paying For College. The Insider’s Guide To Sending Your Child To College – Without Spending Your Life’s Savings.” Scott also publishes a popular free online newsletter, “College Funding Made Simple" which reveals insider’s tips, methods, and strategies for beating the high cost of college.

Scott is the co-founder and a principal of the widely renown College Planning Network, LLC – the nation’s largest and most reputable college admissions and financial aid planning firm. CPN is a proud member of the Better Business Bureau, the National Association of College Funding Advisors, the National Association for College Admission Counseling, the National Association of Student Financial Aid Administrators and the Student Affairs Administrators in Higher Education.

Scott, along with his college funding advisory team, helps thousands of families throughout the country with their college planning needs and offers a series of free educational webinars and workshops on “How To Pay For College Without Going Broke In The Process!” He's been featured or mentioned in The Philadelphia Inquirer, Yahoo News, TheStreet.com, Voice America with Ron Adams, Crains Cleveland Business, and on Cleveland Connection with James McIntyre.  Scott has published numerous articles and is a professional speaker who has addressed thousands of audiences online and offline throughout the United States.  His actionable insights and candid, open approach have earned him & his team numerous media interviews, citations, and speaking opportunities, and his free online video workshop is one of the Internet’s most widely viewed pieces in the college funding space.