Assets in 529 college savings plans dove nearly 17% in 2022, the steepest decline in the past decade, according to a report released Wednesday by Morningstar.
At the end of 2022, 529 plans had $385 billion in assets, down from $461 billion the year before.
The sharp decline was due in part to market performance as well as rising education costs, the report said.
Lower plan fees, however, buffeted the bad news. In 2022, the average fee for an age-based or target-enrollment series in a 529 plan was 0.46%, a 2-basis-point decline from the previous year.
Plans were able to reduce fees by switching to cheaper passive underlying funds, trimming state fees and negotiating with their program managers for better deals, according to Morningstar.
Another positive development is that many 529 plan providers improved their target-enrollment series by adopting smoother glidepaths with less risky and severe equity step-downs as the beneficiary grows closer to college age. At the end of 2022, close to 80% of all plans featured equity steps of 10% or less, and series with large step-downs accounted for less than 3% of the industry.