Contribution Limits

529 plans do not have annual contribution limits. However, contributions to a 529 plan are considered completed gifts for federal tax purposes, and in 2022 up to $16,000 per donor ($15,000 in 2021), per beneficiary qualifies for the annual gift tax exclusion.

Grandparent Changes

Recent changes to FAFSA rules will upend all of this for grandparent-held 529 accounts in the near future.

New changes to the simplified Free Application for Federal Student Aid (FAFSA) form mean that students will not be required to report any support they receive, including funds from grandparent-held 529 accounts, in the future. This means funds in grandparent 529 plans won’t be counted against college goers at all — not when the FAFSA is filled out and not later on when distributions are disbursed to cover eligible college expenses.

The post 2022 Federal Changes to 529 Plans appeared first on 529 Planning.

Besides the financial benefits to having a 529 account, there is another – and possibly more beneficial – benefit that is often forgotten: You can choose almost any 529 account, regardless of the state you currently live in.

Because of this “free-roam” benefit, you can actually shop around for any state or private plan that fit your situation perfectly. However, there may be additional fees or requirements when choosing another states 529 plan either…. so we took these into account when choosing our list.

So, let’s shop around.

We went through all 200+ plans available in the US to find the best plans that anyone can take advantage of. We looked at each plan’s historical performance, its costs and fees, as well as any restrictions placed on out-of-staters. Surprisingly, there are a handful of out-of-state plans still better than most in-state savings accounts.

Proceed With Caution

There are a few bits of information that you should know before looking at any of the top plans:

• Any tax deductions are based on your home state. You will need to ensure that your state provides tax deductions on contributions into out-of-state plans.
• States can change their plan’s requirements at any time. This means that while we take as much caution when building our dataset, things may change. Double check each plan’s information before signing up for anything.

As of March 2022, none of the state-specific plans listed here have any residency requirements.

Top 529 Plans For Anyone

1. Arizona Fidelity Arizona College Savings Plan: This Fidelity managed plan has excellent performance and no account or maintenance fees. Its asset-based expense ratio is between 0.11% and 0.99%.
2. Massachusetts U.Fund College Investing Plan: This Fidelity managed plan is similar to that of Arizona, Delaware and New Hampshire, and has excellent performance and no account or maintenance fees. Its asset-based expense ratio is between 0.11% and 0.99%.
3. New Hampshire UNIQUE College Investing Plan: This Fidelity managed plan is similar to that of Arizona, Delaware and New Hampshire, and has excellent performance and no account or maintenance fees. Its asset-based expense ratio is between 0.11% and 0.99%.
4. Delaware College Investment Plan: This Fidelity managed plan is similar to that of Arizona, Massachusetts and New Hampshire, and has excellent performance and no account or maintenance fees. Its asset-based expense ratio is between 0.11% and 0.99%.
5. New York 529 College Savings Program Direct Plan: This Vanguard plan has no enrollment or maintenance fees, and a very minimal 0.13% manager fee. Its asset-based expense ratio is 0.13%.
6. Indiana CollegeChoice 529 Direct Savings Plan: There are no enrollment fees for anyone using this plan, but out-of-state users will have a minimal $20 annual maintenance fee. Its asset-based expense ratio is between 0.14% and 0.77%.
7. Nevada SSGA Upromise 529 Plan: This plan is managed by Ascensus College Savings with State Street Global Advisors as the investment manager. No enrollment fees and a $20 annual account maintenance fee is waived if you are a Nevada resident. Up to 0.36% program fees plus underlying fund fees can be charged depending on the plan specifics. Its asset-based expense ratio is between 0.28% and 0.89%.
8. Pennsylvania 529 Investment Plan: This plan offers 15 Vanguard investment options and has no enrollment fees. If you collect your documents electronically, the $10 account maintenance fee is waived. Its asset-based expense ratio is between 0.215% and 0.315%.
9. Colorado Direct Portfolio College Savings Plan: The team of Ascensus Broker Dealer Services, Inc. and The Vanguard Group manages this plan, which has no enrollment fees, and an account maintenance fee of $10 that is waived if you receive all the documents electronically. Its asset-based expense ratio is 0.32%.
10. Ohio CollegeAdvantage: This plan consists of Vanguard or DFA funds, and has no enrollment or maintenance fees of any kind. Its asset-based expense ratio is between 0.165% and 0.50%.

Honorable Mentions

Many of these plans also have very minimal fees as well as well-managed underlying funds. Check out this list only if our top 10 list above does not work or if your specific state is listed below.

1. Iowa College Savings Iowa
2. Oregon College Savings Plan
3. North Carolina NC 529 Plan
4. Michigan Education Savings Program (MESP)
5. Washington DreamAhead College Investment Plan
6. Missouri MOST 529 Education Plan Direct
7. Kansas Learning Quest 529 Education Savings Program Direct
8. Illinois Bright Start Direct-Sold College Savings Program

The post Best 529 College Savings Account Plans in 2022 appeared first on 529 Planning.

The 2020-2021 school year’s costs are expected to rise by over 1.3% on average from their 2019-2020 record highs.

Costs – which include tuition, fees, room and board – have increased by roughly 25.3% at private colleges and about 29.8% at public colleges since 1978-79.

At least research suggests that the cost of college is worth it. In 2018, college graduates earned weekly wages that were 80% higher than those of high school graduates. The Bureau of Labor Statistics reports that Americans with a bachelor’s degree have median weekly earnings of $1,173, compared to just $712 a week for those who only have a high school diploma.

Families Continue to Struggle Financially

The Congressional Budget Office – or CBO – in 2019 published a report that projected the changes in the distribution of household income by 2021 from 2016 numbers.

The CBO predicted that 2021 family income would increase about 1-1.5% over the 5-year span.

By comparison, college costs increased 14.1% over the same time period.

The COVID Financial Hit

Despite the one-time stimulus direct-pay $1,200 check in April as well as the potential $600 one in December, families are still struggling. These one-time payments are meager compared to the losses they are seeing financially as many are losing their jobs entirely.

58% of the adult respondents to a Congressional Research Study said they were in households that lost employment income since March due to the impact of COVID. About half of Black or non-Hispanic respondents said they were in households that lost employment income.

As families lose household income, savings are naturally the first to be cut out of their budgets. Seeing as the average amount of funds within 529 accounts dropped in 2019 by over $400, this is only expected to be amplified as 2020 numbers are released.

The post Average 2021 College Costs Increase as More Families Struggle Financially appeared first on 529 Planning.

However, it is not all good news. The average college savings account size is now at $25,657, down from a high of $26,054 in 2019 according to the mid-year data collected by the College Savings Plans Network. While this is still roughly double what it was a decade ago, it does show how higher college costs are eating into savings.

While 529 account balances are growing, unfortunately so too are college costs.

For the 2020-21 academic year, average tuition and fees reached $10,560 for in-state students at four-year public colleges and $37,650 for students at four-year private institutions, according to the College Board.

Increased Acceptance of 529 Plans

36% of all 529 accounts nationwide received contributions either through ACH, a payroll deduction, or some other form of automatic funding in 2019. This is proving that account holders are continuing to make saving for education a part of their everyday life.

As of 2019, more than one-third, or 37%, of families used a college savings account like a 529 plan to help pay for higher education. This amount is up from 21% the year earlier, according to student loan lender Sallie Mae.

The reason for the increase of usage is not a surprise. Throughout the last few years, Congress has relaxed what 529 plan funds can be used for. Add that to the tax deduction or credit for contributions that many families earn by saving in 529 plans, the usage should only continue to skyrocket.

Earnings within 529 plans grow on a tax-advantaged basis and, when you withdraw the money, it is tax-free if the funds are used for expenses such as tuition, fees, books and room and board.

Who is Saving Most for College?

In March, ISS Market Intelligence took survey of 1,001 consumers from across the United States. It showed that families within the $100-$150k income bracket saved for college with 529 accounts the most. 26% of families in this bracket used 529 accounts.

The next highest savers were the $75-$100k income bracket, at 20.9% of them.

What the survey also found was that as the family income increased, the s529 savings decreased. This was likely due to the fact that they were less concerned with being able to afford rising college costs. Families making over $150,000 a year likely have other investment accounts that make as much or more sense than 529 plans.

529 Usage by Child Age

In fact, only 23% of parents under 40 save with a 529 plan and, of those parents, just 22% have children between the ages of 5 and 10 (in kindergarten through 5th grade). 18% of parents using 529 accounts have children in middle school and 28% have high schoolers, according to ISS Market Intelligence. 

The post 529 Plan Savings Grow to Record Highs in 2020 appeared first on 529 Planning.

“OCSP makes it easy to contribute online,” said McDaniel. “Oklahoma parents and grandparents can create or add to an account through the website, increasing their loved ones’ opportunities to attend college and reduce future debt.”

Between now and until the end of the 2020 year, any Oklahoma College Savings Program (OCSP) account created with $25 or more with recurring contributions of $25 or more set up for at least 3 months will receive a $25 match from the state.

Parents, grandparents, relatives or friends who are U.S. residents and are at least 18 years old may open an OCSP account on behalf of a beneficiary, and the minimum initial contribution is only $25. Once an account is open, anyone can contribute, making an OCSP account a great gift idea for all family and friends.

Contributions to an Oklahoma 529 College Savings Plan may qualify for a state tax deduction up to $20,000 for joint filers and up to $10,000 for single filers. Plus, taxpayers can carry forward larger gifts into subsequent years. Limitations apply.⁴

For more information about the Oklahoma 529 College Savings Plan or to open an account, go to www.oklahoma529.com or call (877) 654-7284.

The post Oklahoma to Match College Savings to $25 In Last Days of 2020 appeared first on 529 Planning.

With 2021 just around the corner, we decided to look at what changes to 529 savings plans were enacted in 2020, and what we can expect in 2021.

No Federal 529 Plan Changes

Luckily, all this turbulence did not impact or change the Federal requirements of saving for your child’s college with 529 plans. The last major change to Federal 529 Plan requirements and limitations happened in 2019 with the SECURE Act.

Under the SECURE Act, approved in December 2019, up to $10,000 of 529 funds can now be used to repay student loans. The law also allows 529 funds to be used for apprenticeships.

2020 saw no major changes enacted and 2021 does not appear to have any either… yet.

State 529 Plan Changes

No upcoming 2021 changes to state-sponsored 529 plans have been announced yet. However, some states did make a few changes throughout 2020 – and all of them were for the better.

Illinois

Starting 2021, babies born in Illinois will automatically receive a college savings fund. An automatic $50 deposit will be made into a college savings account which families must claim for their child by their 10th birthday. 

Georgia

In 2020 Georgia doubled their tax deductions when savings are put into a child’s 529 savings plan. The deductions for single filers went from $2,000 to $4,000 per beneficiary, while the deductions for married/joint filers doubled from $4,000 to $8,000. If you are taking advantage of Georgia’s Path2College 529 plan, then this means more money in your pocket through these tax deductions.

Colorado

Colorado‘s Working Families College Savings Act, originally enacted in 2019, has been extended for ten additional years by that state’s legislature. The act provides a way for Colorado employers to boost their employees’ CollegeInvest 529 savings accounts with tax credits. The original legislation ensured the program would continue until 2022, but it will now be effective through 2032.

The plan offers a Colorado tax credit for employers who make contributions to CollegeInvest savings plans owned by their employees. The available tax credit is 20% of the amount contributed to a CollegeInvest 529 account, up to $2,500 per employee. Within that scope, employers will have the flexibility to design specific benefit strategies that best suit their business needs, and the needs of their employees.

New Jersey

New Jersey Governor Phil Murphy proposed in August 2020 a $1,000 “baby bond” nest egg for children from lower income families in an effort to close the wealth gap in the state.

While not specific to 529 plans, this proposal would provide $1,000 in bonds to each child born in 2021 into families earning less than about $131,000 per year or 500% of the federal poverty level. This legislation is expected to help about three out of every four children born in the state.

Pennsylvania

Pennsylvania State Treasurer Joe Torsella lowered the minimum contribution for the PA 529 College and Career Savings Program (PA 529) to $10. Previously the minimum contribution amount for the Guaranteed Savings Plan (GSP) was $15, and the Investment Plan’s (IP) was $25.

In February 2020, PA also gave families the chance to receive a $100 starter gift in a Pennsylvania 529 account for every child born or adopted in the state. A number of other U.S. states have recently enacted similar (albeit minor) programs that aim to cut down on soaring student debt.

Florida

Florida Governor Ron DeSantis announced in January 2020 that the State of Florida will be lowering Florida Prepaid plan prices in order to make college more affordable. The reduction is expected to save Floridians $1.3 billion and will benefit 224,000 current Florida Prepaid customers.

More than 108,000 plans are eligible to receive an average cash refund of $4,700. Plan holders also have the option to transfer their refund to a Florida Prepaid savings account for other college expenses like books, supplies and housing. Desantis says pricing for the 2020 plan year will have the lowest rates in five years, starting at $44 a month for a newborn.

Lowered Admin Fees

Due to the pandemic, many states also lowered their 529 plan administration fees. These fees were cut in order to help keep more money in their constituents pockets during the difficult times of the pandemic. The states that lowered fees were:

• Nebraska NEST (fees reduced by 68%)
• Indiana (fees reduced by 20%)
• North Dakota (reduced from 0.40%-0.41% to 0.35%-0.36%)
• Oklahoma (reduced from 0.3% to 0.25%)
• Missouri (fees reduced by over 26%)
• California ScholarShare 529
• Illinois Bright Start (reduced from 0.15% to 0.14%)

The post 2021 Federal and State Changes to 529 Plans appeared first on 529 Planning.

To repeat from the first report, this report to us leans towards being more interesting than actually useful, but someone might find good use of it. It is important to note that this report is using the most recent data the Department of Education has for each school (circa 2017), and that these are all private universities, so you won’t be finding any of the popular Big 10 or SEC schools in this list. We also only looked at in-state tuition costs, so the typically much higher out-of-state costs are not factored in at all.

Most Expensive Schools

Least Expensive Schools

The post Most and Least Expensive Private Universities by State appeared first on 529 Planning.

To us, this report leans towards being more interesting to us than actually useful, but some might find this of use when looking to find the cheapest public bachelors degree in a specific state. It is important to note that this report is using the most recent data the Department of Education has for each school (circa 2017), and that these are all public universities, so you won’t be finding any Ivy League schools in this list. We also only looked at in-state tuition costs, so the typically much higher out-of-state costs are not factored in at all.

Most Expensive Schools

Least Expensive Schools

As a followup, we decided to also look at the Most and Least Expensive Private Universities by State.

The post Most and Least Expensive Public Universities by State appeared first on 529 Planning.

Nationwide, there are 922 2-year accredited community colleges where associate degrees are available for students. The average tuition at these colleges in 2017 was $2,749 per year, with total costs (tuition + living expenses) averaging $5,746 per year. These costs have risen slower than bachelor degrees at 4-year universities, but still at a rate that makes it difficult for some students to get out from under debt after entering the workforce.

Our analysis shows that over a 5-year period ending in 2017, tuition at community colleges rose in every state across the US. These increases ranged from a paltry 2% in Florida to a much higher 32% in Mississippi. Compare those statistics to the slightly higher range at public 4-year universities where their tuition increased anywhere between 7-34% over the same 5-year period.

The post Community College Tuition Changes by State appeared first on 529 Planning.

As these costs at the schools rise, they directly translate into higher tuition and cost-of-living increases to anyone enrolled in the higher education system. Students in some states were hit much harder than compared to others, with Louisiana topping out with a whopping 106.9% higher education inflation rate over the last 10-year period measured.

The post Higher Education Inflation Rates by State appeared first on 529 Planning.