Despite rising college tuitions and ballooning student debt, only 36% of Americans can correctly identify a 529 plan as an education savings tool, according to a recent study conducted for Edward Jones — a one percentage point decline from 2012, when the firm did its first annual study of the plans.
The recent study also found that only 20% of parents report having saved or planning to save for their children's education using a 529 plan.
In lieu of saving for education with 529 plans, American parents have saved or are planning to save for education costs with a mix of personal savings strategies and financial aid options, with 40% utilizing a personal savings account, 23% relying on scholarships, and 22% employing federal or state financial aid in their education savings strategies, the company said in a release.
Barriers that respondents cited as keeping them from contributing to 529 plans included paying off their own student loans (15%), the fear of being penalized on unused funds if a child doesn’t go to college (14%), and the feeling that they don’t make enough money to open a 529 account (12%).
“With 67% of Americans admitting that they were not aware of the features and potential tax benefits of 529 plans and 65% unaware of their possible uses beyond higher education, there is an opportunity to fill the education gap with the help of a trusted financial adviser,” the firm said.
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