I’ve just returned from the College Savings Foundation’s annual 529 conference, held this year in Scottsdale, Arizona. While many different topics were covered during the two days of the conference, most of the buzz related to a report recently issued by the Government Accountability Office (GAO) to the Chairman of the U.S. Senate Finance Committee.
The report’s title “A Small Percentage of Families Save in 529 Plans” suggests that 529 plans are not doing all that much to help solve the college affordability crisis in this country. To back up this conclusion, the GAO cites statistics indicating that, according to the 2010 Survey of Consumer Finances, less than 3 percent of families saved in a 529 plan or Coverdell Education Savings Account.
The GAO figure rises to 6 percent if it includes only the families that had children under 25 living with them.
But a separate report from Financial Research Corporation (FRC), which supplies data to the College Savings Foundation, finds that 15 percent of all households with children under the age of 18 are using 529 plans. This is presented as encouraging news.
So whom to believe?
My own conclusion is that the precise percentage doesn’t really matter all that much and can likely be explained by different numerators, denominators, data sources, and time periods. But what does matter is whether or not 529 plans are helping American families in a significant way.
I offer my own statistical approach to suggest that 529 plans are contributing in a most impressive way.
The Chronicle of Higher Education estimates there will be 2,912,480 new public high school graduates for 2012-13. The U.S. Census Bureau finds that about 68.1% of high schoolers immediately enroll in college following graduation. This means we can expect to see 1,983,400 public high school graduates heading to college next year.
The College Savings Plans Network (CSPN) says there are approximately 11 million 529 accounts in existence. Simple division suggests that 529 plans have been established for the equivalent of more than 5 graduating classes of college-bound students.
Of course, my analysis should be adjusted for multiple 529 accounts (more than one account for the same child), for 529 accounts held for individuals past high school age, and for private high school students not counted by the Chronicle of Higher Education. But throwing in a few rough-number adjustments still shows 529 accounts having been established for the equivalent of more than 4 graduating classes.
In my mind, this is fairly awesome.
photo credit: Charline Tetiyevsky