The tax-advantaged college savings plans established by Congress 20 years ago are less well-known today than they were a year ago.
About 72% of Americans cannot identify a Section 529 savings plan as being for college savings, according to a recent Edward Jones survey of 1,006 adults. That's up from 66% a year ago.
Plan awareness is higher among those who would be most likely to have the resources to fund them. About 46% of those with at least $100,000 or more know what a 529 plan is, compared with 18% of those with less than $35,000, the poll found.
Adults with children also were more likely to be familiar with the plans.
“Like other financial topics, saving for college is something parents and grandparents tend to put off, thinking they'll take it up later,” said Danae Domian, principal at St. Louis-based Edward Jones. “Often the lightbulb doesn't go off until kids start getting older and thinking about college.”
About 12.5 million 529 plan accounts have a total of about $253 billion in assets today, according to the College Savings Plans Network. Funds in the plans can be used for most college expenses without owing taxes on investment gains.
Peg Creonte, senior vice president of Ascensus College Savings, which provides administrative services to 31 plans in 17 states, said her firm has found a similar lack of awareness of 529 plans.
“It's a product most people aren't very familiar with and they just turn to their savings account to save for college,” she said. “Long term, that's not ideal given the tax benefits of the 529s.”
In addition to the federal tax benefits, most states also offer a deduction for those who contribute to 529 accounts.
If more companies were to educate their employees about college savings vehicles and participated in helping them implement them, it would help 529 savings soar, similar to the way integrating 401(k) plans into employer benefits has helped push retirement savings, Ms. Creonte said.