If you ask an American what a 529 plan is, only one in three people will be able to tell you, according to the 10th Annual 529 Awareness Survey by Edward Jones.
Morning Consult, conducting the study on behalf of Edward Jones, surveyed a national sample of 2,220 adults to gauge what they did or did not know about a 529 plan.
Edward Jones found that even though student loan debt grew 70% between 2012 and 2021, totaling a whopping $1.7 trillion, fewer participants in the 2021 study knew what a 529 college savings plan was or how it could help them financially than those participating in the inaugural study. Only one-fifth of parents in the U.S. reported saving or planning to save for theirs or their children’s education using a 529 plan.
Instead of saving for education with 529 plans, respondents said they have saved or are planning to save for education costs with a mix of personal savings strategies and financial aid options. Nearly half (40%) said they were utilizing a personal savings account; 23% said they were relying on scholarships; and 22 said they were incorporating federal or state financial aid in their education savings strategies.
Study participants who said they knew what a 529 plan was did not all utilize them to pay for college, with 15% citing unpaid student loans as a barrier to saving for their further education or their child’s education, 14% fearful they will be penalized if their child didn’t go to college and 12% unable to afford a 529 account.
Despite those impediments, 49% of respondents ranked saving for retirement as the most important goal of their financial life, followed by saving for an emergency (44%) and saving for their child’s education (30%).
Two-thirds of respondents (67%) said they were not aware of the features and potential tax benefits of a 529 plan, and 65% said they did not know it offered them other benefits in addition to financing a college education.
Financial advisors can play a pivotal role in closing that information gap, Edward Jones sadi. A quarter of respondents who said they did not feel they were saving enough for future education expenses (24%) said they would feel better if a financial advisor could help guide their financial decisions.
Steve Rueschoff, principal at Edward Jones, said in a news release that the rising cost of a college education made 529 plans a crucial, as well as complementary component, in affording one.
“Despite the lack of awareness and understanding of these tools, we feel encouraged that Americans are receptive and seeking the guidance of a financial advisor who can explain the optimal benefits, considerations and many applications of 529 plans,” he said.
Founded in 1922, Edward D. Jones & Co., L.P., is a financial services firm headquartered in St. Louis. The firm manages more than $1.6 trillion in assets for more than seven million investment clients across the U.S. and Canada.