As parents, grandparents and students we know college is coming and that we're somehow going to have to pay for it someday. Fortunately we have many options available to us including savings bonds, the stock market and 529 plans. Starting a 529 account now is always the best option, no matter how old you (or your child) is. While playing the stock market may yield higher returns on your investment, placing your money into a 529 plan allows it to grow in a tax free environment. One study even found that when the federal tax benefits were taken into consideration, 529 plans outperformed their benchmarks in every category.
Iowa has it's own state-operated 529 plan called College Savings Iowa 529 plan. It is important to note that your child does not have to go to a IA college or university in order to use this savings account. 529 plan funds can be used at any accredited college or university across the nation, including some K-12 private schools!
Iowa College Costs & Trends
Colleges and universities across the United States experienced increased operating costs of 2.5% in 2019. This most recent inflation figure was down slightly from the 2.9 percent increase in 2018 and 3.4 percent increase in 2017. These costs are forwarded directly to students in the form of higher tuition and living expenses. As these costs steadily rise every year, parents are looking for ways to help offset these future higher education costs.
These rising costs are hitting closer to home in Iowa as well. Iowa's higher education costs rose by 19.9% in just the last 10 years, ranking as the 42th highest state.
The table below shows the average one-year costs in 2020 for different types of Iowa colleges and universities.
|Ownership||Degree||Schools||Public Out-of-State Tuition||Public In-State Tuition||Median Debt||Total Annual In-State Cost|
These costs rise every year. Rising tuition is a major driver in these increased higher education costs. Tuition at a 4-year university in IA rose 14% (ranked 35th worst in the US), while a 2-year or trade school increased their tuition by 20 percent.
529 Tax Benefits for Iowa Residents
Iowa offers tax benefits and deductions when savings are put into your child's 529 savings plan.
|For single filers:||$3,387/yr per beneficiary|
|For joint filers:||$6,774/yr per beneficiary|
Best 529 Plans in Iowa
The Iowa state treasurer’s office offers two 529 savings plans. The direct-sold 529 plan (College Savings Iowa) is managed by Ascensus College Savings and The Vanguard Group and features age-based and static portfolios using Vanguard funds. The IAdvisor 529 Plan is managed by Voya and features age-based, static allocation and single fund options using multiple investment managers.
|State Plan Name:||College Savings Iowa 529 plan|
|Maximum Contribution:||up to $420,000 per designated beneficiary across accounts.|
|Fees:||$2.00 per year for every $1,000 you invest, or 0.20% per total invested assets.|
Iowa 529 Plan Statistics
There are 278,582 registered schools in Iowa with a total value of $5,604,668,245. That is an average of $20,119 per account. Unfortunately 529 plans are not widely used... a 2018 study by Edward Jones found that only 29 percent of Americans were even aware that 529 savings plans exist!