Massachusetts parents are continuing to save for college with 529 plans as the fate of President Joe Biden’s student debt loan relief program is awaiting a Supreme Court decision in June.
These plans, which are advantaged savings plans designed to encourage saving for educational costs, according to the Securities and Exchange Commission (SEC), have been gaining momentum in 2022.
Indeed, as of Dec. 31, 2022, there were more than 16 million 529 accounts open in state plans across the country — an increase of 340,000 more accounts than the previous year, according to the College Savings Plans Network (CSPN).
“While the invested funds have fluctuated with the market, it is encouraging to see the value of 529s ringing true,” the CSPN said in a statement.
In another sign of increased interest in these plans, CSPN said it continued to see steady growth in accounts as 38% of them are auto-funded either by payroll deduction or direct deposit, which it says, “is critical to the longevity of 529 accounts and the amount of money that is saved for the beneficiary.”
In addition, the average account balance as of December 2022 was $25,630.
“According to the Education Data Initiative’s statistics released in October 2022, the average cost for an American to attend a four-year public university is $102,828. Being a quarter of the way to paying a four-year university bill is a major step for Americans paying for higher education!,” the CSPN said in the statement.
The Biden administration announced on Nov. 22 that the student loan pause — which was set to end Dec. 31, 2022 — will be extended to the end of June 2023, while the administration awaits the Supreme Court’s review of its student debt relief program.
However, many borrowers say they are financially unprepared. A study conducted by Qualtrics on behalf of Credit Karma found that 53% of consumers with outstanding federal student loans say their financial stability depends on their student loans being forgiven.
The study also noted that 56% of respondents say their financial stability is dependent on not having to make payments as the forbearance period remains intact.
One of the issues discussed during the divorce process is how the parents foresee payment of college expenses for their children in Massachusetts.
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