To raise awareness of the savings plans, the College Savings Plans Network, a nonprofit group that represents the plans, is promoting Wednesday (that is, 5/29), as National 529 College Savings Day. More than 30 states are organizing events to promote their 529 plans, and some are offering incentives for families to create accounts.
The plans function as a basic investment account sponsored by state governments. Funds invested in the accounts are allowed to grow tax-free; some states even allow parents to pre-pay future college tuition at current rates. There certainly worth considering for anyone looking to save for college.But it’s important to acknowledge the limits of these plans. The cost of a college degree has risen by 1,120 percent in the past 30 years—a far faster growth rate than any reasonably safe investment vehicle can match. And parents should also keep in mind that 529 plans are considered assets on the federal financial aid application (FAFSA) and thus may drive down the amount of financial aid that schools can offer.Aside from all of this, the wrangling over 529 plans and similar aid programs is beside the point. Much ink has been spilled in debates over student loan interest rates and college saving plans, but none of these things addresses the core issue: tuition is rising too fast. Instead of looking for ways to make outrageously high prices more tolerable, we should be trying to figure out how to rein them in.[Ball and chain image courtesy of Shutterstock]