May 29th Is National College Savings Day!
As education costs continue to rise, thoughtful planning has never been more important. That’s why May 29th is recognized as National 529 College Savings Day—a reminder of the powerful role that 529 plans can play in preparing for future education expenses. These tax-advantaged accounts offer families a practical way to save and prepare for a child’s academic journey, whether it's college, trade school, or even K–12 tuition.
The cost of attending a private college continues to climb, with average tuition and fees reaching $43,505 for the 2024–2025 academic year, according to U.S. News. Out-of-state students at public colleges aren’t far behind, paying an average of $24,513. In contrast, in-state students at public colleges pay significantly less—about $11,011 on average. These figures reflect tuition and fees only and do not include other major expenses like housing, meals, books, and supplies, which can substantially raise the total cost. Over four years, the full price tag of a bachelor’s degree can easily exceed $500,000, depending on the school and location.
It is no surprise that many families are not prepared to pay for college. According to a 2024 survey, fewer than half of parents with a child in college felt ready to pay for their child's first tuition bill. Our team at Covenant Wealth Strategies prioritizes helping families prepare by providing education planning through a variety of tax-favored strategies. Additionally, we seek to provide strategies to also save on the cost of college.
If you are wondering if a 529 could fit your planning needs, we've compiled a list of common 529 Plan questions below.
Why are 529 Plans a good option?
529 Plans allow you to increase savings for a loved one's education expenses. A benefit of using a 529 Plan is that it provides tax-deferred growth and tax-free withdrawals. In addition to the benefit of potential compounded growth, it also gives contributors control over the assets, so children can’t use the funds for a purpose other than education.
What types of education can 529 Plans fund?
While 529 Plans can be used for four-year colleges, they can also be used to cover the costs of vocational school, community college, some foreign institutions, and even qualified kindergarten through 12th grade tuition.
Who can fund a 529 Plan?
Anyone! Common contributors include parents, grandparents, or other relatives. However, really anyone who wants to support a loved one’s future education can open and fund a 529 Plan. For the 2025 tax year, the IRS has increased the annual gift tax exclusion to $19,000 per recipient, up from $18,000 in 2024. This means an individual can contribute up to $19,000 to a 529 plan for each beneficiary without using any of their lifetime gift tax exemption. For married couples electing to split gifts, the exclusion doubles to $38,000 per beneficiary.
What happens if the child ends up not needing the funds?
If the child doesn’t need the funds anymore – say they get a scholarship, or decide not to go to college – the 529 Plan can flex to fit their needs. You can typically transfer the money to another eligible family member without tax consequences. Plus, you can use the funds for other education-related expenses – not just tuition. So if the child receives a grant or other financial aid that covers most or all of tuition, you can apply the 529 funds to other expenses, including:
- Fees, books, supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis
- Computer technology, equipment, and internet access
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
Did you know that qualifying 529 funds can also be used to fund a Roth IRA for beneficiaries?
If college might be in the future plans for your child or grandchild, we encourage you to check out our College Planning Resource Page, and Contact Us so we can help you prepare for the future and design "Strategies for Your Success".
Disclosures:
*In this context, college refers to any 4-year postsecondary institution that offers an undergraduate degree program; this is the average cost to first-time, full-time undergraduates.
Average undergraduate tuition, fees, room, and board rates charged for full-time students in degree-granting postsecondary institutions, by level and control of institution: Selected years, 1963-64 through 2020-21. NCES. January 2022.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Sources:
https://www.bestcolleges.com/research/college-costs-over-time
https://www.usnews.com/education/best-colleges/paying-for-college/articles/paying-for-college-infographic#:~:text=The%20average%20in%2Dstate%20cost,respectively%2C%20U.S.%20News%20data%20shows.
https://www.collegeave.com/press/majority-of-families-save-for-their-childs-college-education-less-than-half-ready-for-the-first-tuition-bill-finds-college-ave-survey/
https://educationdata.org/average-cost-of-college
https://www.bestcolleges.com/research/college-costs-over-time/
https://www.usnews.com/education/best-colleges/paying-for-college/articles/see-20-years-of-tuition-growth-at-national-universitieshttps://www.savingforcollege.com/article/maximum-529-plan-contribution-limits-by-state