Editors' pick: Originally published May 18.
The exploding college debt problem is bad enough without most Americans not knowing one of the best collegiate funding revenue generators on the marketplace - the college 529 plan.
But that's the case, according to the money management firm Edward Jones. In a new report, company analysts say 75% of Americans "don't know what a 529 plan is, compared to 66% in 2015." At the same time, "88% of respondents believe a college degree is important for future employment."
How is that possible, given the fact the skyrocketing college debt issue is front and center in academia and the media, along with across thousands of kitchen tables in the U.S?
"The cost of education remains a top concern for many Americans, and yet the downward trend in 529 awareness persists year over year," says Steve Seifert, principal at Edward Jones. "We must continue to teach individuals and families about the investments, like 529 college savings plans, that offer attractive and practical ways to save for future college expenses. Balancing multiple savings priorities on a month-by-month basis can be challenging, but we cannot skimp on one goal at the expense of another."
If you ask collegiate financing experts, they'll tell you that a 529 plan is a "no brainer."
That's exactly the term used by Sean Moore, founder of SMART College Funding, in Boca Raton, Fla. "529 funds can be used for any qualified educational expenses at any college in the country, as well as many abroad," Moore says. "A 529 savings plan can be passed from one generation to the next and the funds never expire. A parent or grandparent can start saving for children that aren't even born yet in a 529 savings plan. In addition, you can use or purchase any 529 savings plan from any state."
Moore does offer a warning, though. "Which state you purchase your 529 savings plan from should be considered carefully," as different states have different college funding plans.
To get the most from a 529 plan, get creative, and get the whole family involved. "A great way to leverage a 529 plan is to have grandparents superfund a 529 plan by contributing five years all at once," says Robert Farrington founder of The College Investor. "Grandparents can make a five-year election, where they contribute the maximum allowed for five-years all at once. This equates to a $70,000 contribution."
The move also helps the grandparent with estate planning, by putting their assets in a tax deferred account for the benefit of their grandchild, Farrington says.
Sallie Mae, one of the leading college financial services companies in the U.S., recommends following a 1-2-3 approach when using 529 plans. Here's how Rick Castellano, a Sallie Mae spokesperson, breaks it down.
1. Open a savings account. "Set up and designate a savings account as your college fund," Castellano says. "Deposit gifts from friends and family, and sign up for free services that let you earn cash back to save for college."
2. Make regular contributions. "Set a goal, and create a routine of adding money," he adds. "Even a little bit adds up over time, and automatic deposits make saving easy."