Navigating the Storm: How 529 Plans Provide Stability Amidst Uncertainty

Dear Colleagues,

As College Savings Month draws to a close, it's worth reflecting on two timeless adages. The first is, “The only thing you can be sure of is that there’s nothing to be sure of.” In a world fraught with economic volatility, political upheaval, and global uncertainties, planning for the future can feel like navigating stormy seas. For many families, saving for college can seem like preparing for a turbulent voyage.

The rising cost of higher education is a well-known challenge. Tuition fees, textbooks, and living expenses have been steadily increasing, outpacing general inflation and wage growth. This relentless climb adds significant financial pressure on families.

Compounding this difficulty is the ever-shifting political landscape. Changes in federal and state education policies, including alterations to student loan programs and tax benefits, can introduce additional complexities into the college planning process.

Global events, too, can impact financial stability. Economic crises and geopolitical conflicts can create turbulence in investment markets, affecting the value of savings and investments.

Yet, there is solace in the second adage: “The more things change, the more they stay the same.” For nearly 30 years, 529 plans have remained a stable and reliable tool for college savings.

Established by Section 529 of the Internal Revenue Code in 1996 and enhanced by the Economic Growth and Tax Relief Reconciliation Act of 2001, 529 plans offer significant tax advantages. Contributions to these plans grow tax-free, and withdrawals for qualified education expenses are also tax-free. This makes 529 plans an effective way for families to manage rising education costs and mitigate the effects of economic downturns.

While 529 plans are governed by state laws, their tax benefits are consistently advantageous. This consistency provides peace of mind amidst political fluctuations. Many states also offer additional tax deductions or credits for 529 plan contributions, further enhancing their financial benefits.

In uncertain times, a 529 plan can be a beacon of stability. Managed by professional investment managers who adjust strategies based on market conditions, these accounts aim to protect and grow your investments. Additionally, many 529 plans offer age-based investment options that automatically adjust as the beneficiary approaches college age, helping to balance risk and stabilize returns.

Fortunately for all of us and our colleagues, NAST has been on top of the issue even longer than 529 plans have been in existence.

NAST formed the College Savings Plans Network (CSPN) as an affiliate to the National Association of State Treasurers in 1991. CSPN acts as a central hub for information on state-administered college savings programs. It also tracks federal developments and advocates for legislation that benefits 529 plans.

So, while “the only thing you can be sure of is that there’s nothing to be sure of,” in an era marked by economic, political, and global uncertainties, a 529 college savings account stands out as a crucial tool for securing your family’s educational future. It provides a dependable foundation for your planning efforts, helping to chart a course toward a more secure and promising future. After all, “the more things change, the more they stay the same.”

Colleen Davis
Delaware State Treasurer
CSPN Executive Committee Member