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.
New Jersey has it's own state-operated 529 plan called NJ BEST College Savings Plan. It is important to note that your child does not have to go to a NJ 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 New Jersey as well. New Jersey's' higher education costs rose by 18.3% in just the last 10 years, ranking as the 44th highest state.
The table below shows the average one-year costs in 2020 for different types of NJ 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 NJ rose 12% (ranked 39th worst in the US), while a 2-year or trade school increased their tuition by 18 percent.
Unfortunately New Jersey does not offer any tax benefits for socking away funds in a 529 account for your child. Thankfully, NJ residents can open an account in any other state that lets them.
New Jersey has two 529 savings programs, both managed by Franklin Templeton Investments. One 529 plan is direct-sold and available only to New Jersey residents (NJBEST), and the other is sold nationwide through financial advisors (Franklin Templeton 529 College Savings Plan).
|State Plan Name:||NJ BEST College Savings Plan|
|Maximum Contribution:||up to $305,000 per beneficiary|
|Fees:||Program management fee of 0.1% of assets each year. $25 annual maintenance fee, waived for New Jersey residents.|
There are 249,350 registered in New Jersey with a total value of $5,729,291,336. That is an average of $22,977 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!