Rich Polimeni says “529 college savings plans have come of age,” in discussing the findings of CSF’s 12th Annual State of College Savings survey of parents across the country.

September 6, 2018

As student loan debt rises, parents of college-bound kids stash money away.


Pittsburgh Post-Gazette

While many parents report they are still making monthly payments on their own student loans, some are still making an effort to put away money to help their children avoid the same burden.

In its 12th annual survey of parents nationwide across all income brackets, the Washington, D.C.-based College Savings Foundation found that 529 college savings funds are a popular choice for households with college-bound children. 

A full 50 percent of all families have one of the savings plans in place — either in the parent’s name (33 percent) or in the name of the child (17 percent).

“529 college savings plans have come of age,” said Richard Polmeni, chair of the College Savings Foundation, a nonprofit backed by investment managers, broker-dealers, governmental bodies, and accounting and consulting firms, among others. Congress created the plans in the mid-1990s, the organization said.

“We are excited to see that parents are embracing proven strategies for funding their children’s higher education by saving early, often, and with the advantages of 529s,” he said.

A 529 plan is a tax-advantaged savings plan designed to encourage setting aside money for future college costs. Money in the fund grows tax-deferred and the earnings are never taxed as long as it is used for qualified educational expenses.

This year’s survey found 45 percent of parents had stashed away more than $25,000 per child.

However, the percentage of parents who saved fell slightly from an all-time high of 83 percent last year to 79 percent.

Some parents may worry that savings might affect a child’s chances of receiving financial aid, which is heavily based on income. Money set aside in a 529 savings plan will not significantly bump up a family’s expected contribution.

In light of the survey’s findings that 45 percent of parents are still paying off student debt of their own, Pittsburgh financial adviser Paul Brahim believes families are better off making the sacrifice to save on the front end rather than endure the pain of servicing loan debt on the back end.

“You might remember the old Fram Oil Filter commercial from the ‘70s,” said Mr. Brahim, CEO of BPU Investment Management, Downtown. “The choice was a regular oil filter change or an engine rebuild. The ad said, ‘You can pay me now, or pay me later. But either way you will pay me.’

“Parents and grandparents have figured out that borrowing for school is a lot more expensive than saving for school,” he pointed out. “I think they know the new economy will demand new skills and they are willing to sacrifice today so their children and grandchildren have the right education for tomorrow.”

Parents also have broadened their definition of higher education beyond the traditional four-year school.

The survey found 64 percent of parents think about vocational schools and community college in the same way as they do about public and private education.

Still, some are opting out. About 40 percent of parents said their children had considered not going to college at all, up from 28 percent last year.

A third of those parents said their child didn’t want them to be paying that much money; 28 percent said their child felt that a particular career choice could be achieved without college; 18 percent said their child was indifferent to college; and 17 percent said the child didn’t want student debt.

Tim Grant: or 412-263-1591.