Tax-exempt 529 plans provide Americans with a powerful educational savings vehicle—perhaps someone should tell them.
A recent study by St. Louis-based Edward Jones found that, as in recent years, most Americans have no idea what a 529 plan is. Even more disturbing, awareness of 529 plans seems to be decreasing.
In its fifth annual 529 Plan Awareness Survey, Edward Jones found that 72 percent of Americans don’t know what a 529 plan is, compared to 66 percent in 2015.
Awareness of 529 plans is down from the inaugural survey in 2012, when 37 percent of respondents could correctly identify the plans.
"The cost of education remains a top concern for many Americans, and yet the downward trend in 529 awareness persists year over year," said Steve Seifert, principal at Edward Jones, in a released statement. “We must continue to teach individuals and families about the investments, like 529 college savings plans, that offer attractive and practical ways to save for future college expenses."
529 plans were first offered to Americans in 1996 as a way to invest for their childrens’ education without them losing eligibility for financial aid.
The wealthy appear to be more aware of 529 plans. While 46 percent of respondents with household incomes of $100,000 or more correctly identified 529 plans, only 18 percent of those making less than $35,000 could do the same.
Broken down by age, Generation X respondents were more likely to be aware of 529 plans, with 35 percent able to correctly identify them. Only 24 percent of millennials could identify the plans.
Respondents with children were also more likely to successfully identify 529 plans than those without children, 32 percent versus 26 percent.
Most respondents, 88 percent, believed that a college degree is important for future employment. When asked if it was likely they would participate in a 529 plan, the majority, 86 percent, said yes.