Obtaining a college degree is one of the largest financial endeavors available to Americans. The cost of tuition rises on an annual basis at a pace that regularly exceeds broad inflation rates, while debt loads continue to grow larger with each graduating class. Saving ahead of time can help reduce the financial pressures of college, but many Americans are overlooking tools specifically designed for higher education expenses.
Student debt has become an epidemic in the current economy. According to a recent analysis by the Pew Research Center, nearly four in 10 U.S. households headed by an adult younger than 40 have student debt, representing the highest share on record. Households headed by a young, college-educated adult with student debt only have an average net worth of $8,700, compared to $64,700 to those with college degrees and zero student debt.
In order to help offset college costs and debt burdens, Americans should consider 529 savings plans, which are tax-advantaged investment plans to encourage saving for future higher education expenses. They are sponsored by states, state agencies, or educational institutions, and are authorized by Section 529 of the Internal Revenue Code. All 50 states and the District of Columbia sponsor at least one type of a 529 plan.