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.
Massachusetts has it's own state-operated 529 plan called Massachusetts U.Fund College Investing Plan. It is important to note that your child does not have to go to a MA 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!
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 Massachusetts as well. Massachusetts's' higher education costs rose by 38% in just the last 10 years, ranking as the 24th highest state.
The table below shows the average one-year costs in 2020 for different types of MA 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 MA rose 24% (ranked 8th worst in the US), while a 2-year or trade school increased their tuition by 24 percent.
Massachusetts offers tax benefits and deductions when savings are put into your child's 529 savings plan.
|For single filers:||$1,000/yr|
|For joint filers:||$2,000/yr|
Massachusetts has two programs available: the U.Fund College Investing Plan, a direct-sold 529 college savings plan managed by Fidelity Investments using Fidelity mutual funds, and the U.Plan Prepaid Tuition Program, offered by MEFA.
|State Plan Name:||Massachusetts U.Fund College Investing Plan|
|Maximum Contribution:||up to $375,000 per beneficiary across accounts|
|Fees:||No enrollment or account maintenance fees; 0.09% to 0.35% program management fees, depending on portfolio options.|
There are 199,012 registered in Massachusetts with a total value of $6,593,099,942. That is an average of $33,129 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!