College Savings: A Top 529 College Savings Plan Cuts Fees — Will This Be a Trend?
The ever-ballooning cost of a college education in the United States is a major money worry for many parents, so any financial relief along the way is more than welcome. The nation’s largest administrator of college savings 529 plans is doing its part by cutting administrative fees for its customers — a move that could prompt other 529 plans to follow suit.
In an announcement earlier this month, Virginia529 said it would reduce administrative fees by 46% for all Invest529 customers effective Jan. 1. The reduction could save customers millions of dollars and also let them accrue more money in investment returns.
It was the second time in three years that Virginia529 lowered administrative fees for its Invest529 program, and it comes at a time when high inflation is eating up budgets in many other spending areas.
“Making education more affordable is at the heart of our mission,” Virginia529 CEO Mary Morris said in a press release. “This reduction reflects our continuous efforts to maintain one of the lowest 529 fee structures in the country and to offer the best chance for our families to meet their savings goals.”
Virginia529’s decision to lower its fees even further could lead other plans to do the same — especially since Virginia529 is such a major force in the industry. Last year it became the first 529 plan to pass $100 billion in assets under management. It has more than three million accounts across its national direct-sold and advisor-sold 529 savings programs.
Invest529 offers more than 20 investment options and is open to legal residents of all 50 states. The plan can be used at eligible educational institutions around the world and has a minimum initial deposit of $10.
College 529 savings plans have become a popular choice for Americans who want to stash away money to pay for higher education. Your earnings grow on a tax-advantaged basis, and when you withdraw the money, it is tax-free if the funds are used for qualified education expenses such as tuition, fees, books and room and board, CNBC noted.
What’s more, 34 states and the District of Columbia offer a write-off for 529 contributions as a state income tax deduction or credit, according to Morningstar. The average account size for 529 plans hit a record of $30,287 in 2021, CNBC noted, citing data from the College Savings Plans Network.
Fees associated with the plans have declined over the past couple of decades as college tuition costs have skyrocketed. Today, total investment and administration fees typically range from zero to 2%, depending on how the accounts are managed, CNBC reported.
Meanwhile, college education costs keep pushing higher. You can expect to fork over around $100,000 for a typical four-year degree at an in-state school –– and a lot more than that for out-of-state public schools and private universities.
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