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Author(s):Aldeman, C.
Title:Why 529 college savings plans favor the fortunate
Source:http://www.educationsector.org/sites/default/fi...
Date:2011
Organization:Education Sector
Short Description:These charts show that inherently unpredictable events dramatically affect 529 results. As states decrease their investment in higher education, more of the burden of paying for college shifts to individuals and families. The result is a greater reliance on 529 savings plans. But this option depends on key assumptions to work as planned, such as the belief that the stock market, based on historical averages and given enough time, will always rise.
Annotation:These charts show that inherently unpredictable events dramatically affect 529 results. As states decrease their investment in higher education, more of the burden of paying for college shifts to individuals and families. The result is a greater reliance on 529 savings plans. But this option depends on key assumptions to work as planned, such as the belief that the stock market, based on historical averages and given enough time, will always rise. This assumption is touted by the 401(k) industry, which encourages long-term investments in the stock market as a way to pay for retirement. But saving for college is not like saving for retirement. The shorter time horizon of saving for college—18 years for traditional college students compared to 40+ years for retirement—increases risk and volatility. And, unlike retirement, college typically cannot (and often should not) be delayed for a year or two if investments turn sour. Students who enter college immediately after high school have a greater chance of eventual graduation.
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Saving for College

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