Meanwhile, most Americans say they are using personal savings to pay for college
St. Louis, MO - Seven out of 10 Americans still do not know what a 529 plan is, according to the annual 529 Plan Awareness Survey from financial services firm Edward Jones. In its sixth-year monitoring college savings awareness, the survey found that most Americans still could not correctly identify a 529 plan as an option for saving for college expenses among four potential options. Only 32 percent of respondents correctly identified the savings option this year, up four percent from 2016 (28 percent), revealing a slight increase in overall awareness during the past 12 months. These college savings plans were first offered in 1996.
“The cost of college is rising annually, and many Americans are trying to identify the best savings strategy to address their needs,” said Kyle Andersen, a principal at Edward Jones responsible for college savings strategies. “Most Americans are unaware of the wide array of strategies that exist to help them put their goals into action. We urge investors to be proactive and learn about the different investment and savings options available to ensure they properly align with their long-term financial goals.”
Awareness varied by several factors, including household income, household size and age. Gen-Xers were significantly more likely to correctly identify 529 plans (47 percent) compared to their Millennial (30 percent) and Boomer (29 percent) counterparts. Similarly, respondents with children were far more likely to correctly identify 529 plans as a college savings plans than those without children (42 percent vs. 27 percent, respectively). Similar to previous years, the survey found that 529 plan awareness increased with household income.
When asked to identify all the specific saving strategies employed to pay for the cost of higher education, Edward Jones found that almost half of Americans (43 percent) used, or plan to use, personal savings to pay for college. This was followed by scholarships (36 percent), federal or state financial aid (35 percent) and private student loans (23 percent), with 529 plans rounding out the list as the least-used strategy (14 percent).
The survey indicated that of all generations, Millennials are most open to using various saving strategies to pay for college. Respondents ages 18-34 showed a strong preference for using a personal savings account among other options as a part of their college savings strategy, with 61 percent indicating so. Millennials and Gen-Xers also are most likely to use, or indicate that they plan to use, scholarships (55 percent and 46 percent) and federal or state financial aid (59 and 38 percent) compared to their Boomer counterparts (20 percent and 18 percent, respectively).
“We’re encouraged by the fact that younger respondents are leveraging a combination of investing and savings strategies to help pay for college,” added Danae Domian, an Edward Jones principal responsible for college savings plans. “There are many variables that affect a college savings strategy, so it's important to stay well diversified and start planning immediately. Proper education can prevent individuals from solely relying on scholarships or financial aid, as these strategies can be unpredictable. Incorporating a 529 plan into an overall college savings strategy will help with long-term planning and allow for flexibility in both annual contributions and recipient eligibility based on individual lifestyle.”
As part of its ongoing effort to raise awareness for 529 plans and college savings techniques, Edward Jones branches across the country are recognizing May 29 as “Save for Education Day,” a firm-wide holiday derived from the name of the popular college savings tool. Edward Jones branch offices will be hosting events in their communities to remind families about the importance of setting education savings goals. Families are encouraged to visit their local branches to learn more about planning for their children's educational future. For more information about specific events in your community, contact firstname.lastname@example.org.
Edward Jones, a FORTUNE 500 firm, provides financial services for individual investors in the United States and, through its affiliate, in Canada. Every aspect of the firm's business, from the types of investment options offered to the location of branch offices, is designed to cater to individual investors in the communities in which they live and work. The firm's 15,000 financial advisors work directly with more than 7 million clients. Edward Jones, which ranked No. 5 on FORTUNE magazine's "100 Best Companies to Work For 2017," is headquartered in St. Louis. The Edward Jones Web site is located at www.edwardjones.com and its recruiting Web site is www.careers.edwardjones.com. Follow Edward Jones on Twitter @EdwardJones and visit the firm's Facebook site at www.facebook.com/edwardjones. Member SIPC.
Survey was conducted by ORC International’s CARAVAN Omnibus Services and was based on 1,009 landline and cell phone interviews of U.S. adults conducted May 11-14, 2017. The margin of error was +/-3%.
Withdrawals used for expenses other than qualified education expenses may be subject to federal and state taxes, plus a 10% penalty. There may be state tax incentives available to in-state residents who invest in their home state’s 529 plan. Student and parental assets and income are considered when applying for financial aid. Generally, a 529 plan is considered an asset of the parent, which may be an advantage over saving in the student’s name. Make sure you discuss the potential financial aid impacts with a financial aid professional. Tax issues for 529 plans can be complex. Please consult your tax advisor about your situation. Edward Jones, its financial advisors and employees cannot provide tax or legal advice.