Despite Economic Challenges, Americans Still Prioritize Saving for Education, Survey Finds
Tuesday, May 23rd, 2023
There have been many economic challenges over the past year, such as rising inflation and higher interest rates, yet the need for advanced education has remained just as important to the majority of Americans (55%), according to a recent study by financial services firm Edward Jones with Morning Consult. In fact, respondents' plans to contribute to education expenses have increased over the past two years.
Despite this, the 12th annual Edward Jones 529 awareness survey found that the number of respondents who correctly identified a 529 plan as an education savings tool is at its lowest level since 2020 (34% compared to 45%).
"While it is great that Americans are prioritizing saving for education expenses, it's unfortunate that the awareness of 529 plans has declined substantially," said Steve Rueschhoff, Principal, Managed Investments and Insurance at Edward Jones. "With changes to federal and state laws, 529 plans can now be used for more things, benefiting more Americans and their opportunities for education and advancement."
Financial Advisors Are Key to Raising Awareness and Confidence
In fact, financial advisors can play a critical role in making sure Americans understand the benefits of 529 plans and also help ensure they have a comprehensive plan for covering education expenses. Nearly one in four adults says working with a financial advisor to guide their financial decisions would help them feel more confident.
The survey also found that Americans have a greater interest in enrolling in a 529 plan after learning about the wide array of benefits – emphasizing an opportunity for financial advisors to educate individuals on these strategies. This is especially true in light of the recent passage of the SECURE 2.0 Act which (among other provisions) enables 529 account owners to roll over unused 529 assets into a Roth IRA for the beneficiary. This change is effective in 2024 and is subject to certain criteria and limits. Over one-third of investors said the ability to roll unused 529 assets to Roth IRA made them feel more inclined to enroll in a 529 plan. Other benefits that increase the inclination to use a 529 plan include the tax benefits (37%), having the flexibility to control the 529 account (35%) and using it for qualified education expenses at eligible universities (33%).
Current Economic Landscape Has Americans Reconsidering Higher Education Plans
Unfortunately, it's no surprise that since the onset of COVID-19 in 2020 there has been a noticeable decline in Americans saving for a conventional, four-year college experience. The current economic landscape has impacted education plans even further, with respondents saying they are increasingly likely to consider more cost-effective options to pursue higher education. Just under a quarter of adults (23%) are considering online-only college programs or attending community college (22%) rather than a traditional four-year, in-person university (16%).
The survey also found there may be a correlation between adults considering affordable college options and a lack of confidence in how much they are currently saving for education costs. Just under half of adults (44%) say they are not currently saving enough for future education expenses, especially in light of higher education costs and economic pressures.
"Understandably, with the rise of educational costs and the pressures we're feeling from the economic environment, Americans are turning toward cost-effective options for education," added Rueschhoff. "Regardless of the path you take, it's important to understand all of the available education savings options, such as a 529 plan and its benefits. Many investors simply aren't aware that 529 plans can not only be used for college education costs but K-12, community college and trade schools."
To continue to raise awareness for 529 plans and education savings strategies, Edward Jones has partnered for lasting financial strength with EverFi on its Financial Fitness program. The initiative has helped more than 500,000 learners increase their financial knowledge since 2020, halfway to its one million learner goal by the end of 2025. Edward Jones branches across the country are recognizing May 29 as "Save for Education Day" to aid in the firm's goal to raise awareness for 529 plans and education savings.