Americans have utilized the popular 529 plans to save for college to the tune of $248 billion. The amount in those plans grew by 9% last year. And it has become very popular to save for college as early as when a child is one years old. The College Savings Plans Network advices that this is a smart move by parents as the cost of college continues to rise. The average value of these accounts is now at $20,000. But costs continue to rise and the government only finds new ways to keep the cost of college on an upward trend.
That amount of the average plan is only enough to cover in-state tuition for one year. And its only half the amount needed if someone goes a private school.
The plans allow someone to save and withdraw money tax-free. The Republican congress is trying to make the rules for 529 plans more flexible, giving a more expanded list of items that can be purchased tax-free. On the other end of the spectrum, the Obama administration would prefer to eliminate the tax-free nature of the accounts, making them simple investment vehicles with no benefits.
The best to hope for is no change until the environment in Washington is more favorable to the plans and reducing college cost.
'State of the 529' Q&A Webcast