529 Tuition Savings Plans Reach $508B in Q2

529 savings plans are experiencing continued growth, as estimated net inflows totaled $3.6 billion in the second quarter of this year, compared with $2.1 billion in the first quarter, according to new data released by ISS Market Intelligence. 

As of June 30, 16.8 million accounts had invested $508 billion in assets in 529 savings and prepaid plans, according to data from ISS MI, which, like PLANSPONSOR, is owned by ISS STOXX.. According to ISS MI, 15.9 million accounts had invested $484 billion in 529 savings plans alone.  

529 plans are tax-preferred savings plans that can be used by parents and others to save for college tuition costs. Prepaid tuition plans allow parents, grandparents and others to prepay tuition at today’s tuition rates at eligible public and private colleges or universities, helping them manage future education costs, according to FINRA. 

ISS MI found this increase in net inflows aligns with continued demand for 529s and more parents successfully using 529s for their intended purpose of saving for qualified educational expenses “to and through” 2024’s market and economic volatility. 

529 plans are qualified education expense programs that permit contributions to tax-advantaged accounts that can be invested in and used to pay for the qualified education expenses of the beneficiary. The SECURE 2.0 Act of 2022 also allows certain assets in a 529 plan maintained for at least 15 years for a designated beneficiary to be rolled over on a tax-free basis to a Roth IRA for the same beneficiary. 

“The overall outlook for 529s continues to brighten, especially with the expansion of qualified expenses to certain types of qualified distributions from 529s to Roth IRAs,” wrote Paul Curley, director of 529 and ABLE research at ISS MI, in a recent report. “As 529s expand from a product for education financial planning to retirement financial planning in 2024, we expect new energy by new stakeholders to drive growth over the next three to five years.” 

In addition to 529 investment, 180,748 accounts invested $2.032 billion in ABLE accounts, the research found. 

Achieving a Better Life Experience accounts are tax-advantaged savings accounts for people with disabilities and their families. The Achieving a Better Life Experience Age Adjustment Act goes into effect in 2026, increasing the age threshold for people to save in and benefit from ABLE accounts to 46 from 26, providing any individual whose disability onset began prior to turning 46 the opportunity to open an ABLE account.  

The five largest 529 Savings Plan program managers by total assets through Q2 include: 

1. Ascensus: $131.4 billion  
2. American Funds: $93.2 billion 
3. Fidelity: $45.0 billion 
4. TIAA: $44.7 billion 
5. Union Bank & Trust: $29.6 billion 

In addition, the five largest 529 savings plans by second quarter assets include: 

1. CollegeAmerica 529 Savings by American Funds: $93.2 billion 
2. New York 529 Direct by Vanguard: $42.0 billion 
3. Vanguard 529 by Vanguard: $35.7 billion 
4. My529 by State of Utah: $24.0 billion 
5. UNIQUE College Investing Plan by Fidelity: $21.5 billion 

As student loan debt is frequently identified as one of the largest causes of financial stress and impediments to retirement savings among U.S. workers, parents can help their children avoid student debt by opening a 529 account, according to Curley.  

The IRS also published guidance earlier this week to assist plan sponsors that are providing or planning to provide retirement plan matching contributions based on employees’ qualified student loan payments, as permitted under SECURE 2.0.