Why 529 College Savings Plans Favor the Fortunate

Charts You Can Trust | March 8, 2011
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As college costs have continued to rise, states have offered families a way to save for their child's education. Private savings accounts, known as 529 savings plans, allow a family's investment to grow tax-free until a child is ready for college. Today, every state sponsors at least one 529 plan, and families have more than 10 million accounts, assets of which have increased from $14 billion to $135 billion in the last decade.

In Why 529 College Savings Plans Favor the Fortunate, Policy Analyst Chad Aldeman takes a closer look at the track record of these savings plans. Are they the best way to make college more affordable? Do they help families who might not otherwise be able to send their son or daughter to college?

Using key figures to calculate the value of savings plans over time, Aldeman reveals the importance of timing for 529 investors. He also explores how 529 plans are—and are not—like the 401(k) plans many workers use to save for their retirement. And he looks at who benefits most from 529 plans.

As states decrease their investment in higher education, more of the burden of paying for college will shift to individuals and families. And helping families afford higher education is a worthy public policy goal. But based on the data assembled in this Chart You Can Trust, Aldeman asks whether 529 plans are the best way to meet that goal.

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