On December 22, 2017, the president signed new tax legislation into law. We're working on updating our website to reflect the new U.S. tax laws. In the meantime, the website may not address the changes. The legislation includes several new provisions related specifically to 529 plan accounts. We'll provide more information as additional details about the effects of the tax bill become clear. We encourage you to consult a qualified tax advisor about your personal situation.
It's never too early or too late to start saving for college. Here’s why you should start now.
College savers become college students.
Young people who expect to graduate from a four-year college and have a college savings account are approximately six times more likely to attend college than those without an account.1
College pays off.
College graduates earn as much as 65 percent more than the typical high school graduate over 40 years.2
Time can work for you.
Today's college tuition is expensive. But regular investments can add up to a significant college nest egg over time.3
Starting early can make a big difference.
As you can see in the hypothetical chart below, if an account owner began to save $50 a month when a child was 1 year old (with an initial contribution of $250), a 529 college savings plan could potentially have an account worth $16,677 by the time the child was college age.4
While starting an account later in a child's life (say, age 15) could still result in tax-free assets of more than $2,000.4
Saving is better than borrowing.
With the high cost of college and today's relatively low interest rates, it may seem like a good idea to borrow for college when the time comes, rather than saving money now. Compare these two hypothetical scenarios:
Scenario 1: Terry's parents start investing $100 a month into a 529 plan account right after Terry's birth. In 18 years (assuming a 5% annual rate of return), they could potentially save more than $35,000.3
Scenario 2: Terry has to borrow $35,000 to attend college. Based on a private student loan rate of 7.0 percent, Terry could be faced with a monthly payment of $406 for 10 years (or $48,720).5
1Elliott & Beverly, The role of savings and wealth in reducing "wilt" between expectations and college attendance; Journal of Children & Poverty, 2011.
2College Board: Trends in College Pricing, 2013.
3A plan of regular investment cannot ensure a profit or protect against a loss in a declining market.
4The hypothetical example assumes college begins at age 18 and is based on a 5 percent rate of return compounded daily, and is for illustrative purposes only. It does not reflect an actual investment in any particular 529 plan or taxes, if any, payable upon withdrawal.
5This hypothetical example is for illustrative purposes only and assumes no withdrawals made during the period shown. It does not represent an actual investment in any particular 529 plan and does not reflect the effect of fees and expenses. Your actual investment return may be higher or lower than that shown. The loan repayment terms are also hypothetical.