NEW YORK (June 17, 2020) – ISS Market Intelligence (ISS MI), the leading provider of critical data, insights, and research to the global financial community, today announced the release of this year’s 529 Industry Analysis report. The annual report, now in it’s 10th year, provides a unique and deep analysis of the state of the 529 industry as well as on the decision-making and product-selection processes of individual survey respondents regarding college saving choices.
529 industry assets continue to grow, totaling $346.3 billion at the close of 2019, according to ISS Market Intelligence data. When comparing today’s 529 savings plan asset levels to those of 11 years ago ($88.5 billion in 2008), the growth is marked, representing a 391 percent increase, or a 13.2 percent compound annual growth rate (CAGR). The main driver of this growth has been annual net inflows, which remained positive even during the market downturn of 2008, with net inflows of $5.3 billion during that year.
While potentially subject to a slow down due to COVID-19-related market turmoil this year, growth is expected to continue.
“Gross contributions are expected to continue to grow based on the expansion of federal and state tax incentives and qualified expenses, thereby broadening 529 usage to new demographics and deepening of usage amongst current 529 users,” said Paul Curley, Director of College Savings Research for ISS Market Intelligence. “Moreover, this year’s survey shows 529 plan awareness growing for the third straight year among non-529 savers, jumping from 63 percent in 2017 to 79 percent in 2020 with a 6 percent increase in 2020. This a strong signal of future demand and growth.”
The 90-page report is undergirded by a survey of more than 1,000 U.S. households with children under the age of 18 to help identify the decision-making and product-selection processes of individuals who were at the time of the survey either 529 users, non-529 college savers or non-college savers.
Undertaken between March 23, 2020, and April 13, 2020, against the backdrop of the COVID-19 pandemic, the survey shows slightly fewer families are saving for college and slightly more families are saving with 529s. Specifically, the percentage saving for college decreased from 58.8 percent in 2019 to 58.1 percent in 2020, while the percentage of 529 users increased from 26.5 percent in 2019 to 27.7 percent in 2020. Presented differently, the percentage of college savers using 529 plans increased from 45.0 percent in 2019 to 47.6 percent in 2020, suggesting college savers are becoming more aware of the importance of saving and saving efficiently with 529 plans.
529 plans also appear to be growing in favor for their versatility in helping families retool in the current economic environment through an expanded definition of sanctioned programs. The December SECURE Act, for example, proved timely with its expansion of qualified 529 distributions to include apprenticeships and repayment of student loans.
The potential for near-term legislative and regulatory reform may further stimulate interest in and demand for 529 plans.
“Discussions around the Higher Education Reauthorization Act, which kicked off in earnest last fall, bear close watching,” said Curly. “We may see the hurdle of adverse financial aid impacts stemming from 529s be addressed by Congress, spurring more to save through such plans instead of opting for loans.”
To learn more about the report, please click here.
About ISS Market Intelligence
A division of Institutional Shareholder Services, ISS Market Intelligence (MI) provides critical data and insight to global asset managers, insurance companies and distributors to help them make informed, strategic decisions to manage and grow their business. Through its industry-leading combination of proprietary and integrated datasets, in-depth global research and reliable executive engagement, ISS MI delivers solutions for market sizing, competitor benchmarking, product strategy and opportunity identification across a wide range of financial products including funds, annuities, insurance, mortgages, and other instruments. The ISS MI group includes the industry-leading data platforms BrightScope, Financial Clarity, Local Market Share, Mortgage Clarity and Simfund, as well as a full collection of global research and analytic services including 529 & ABLE Solutions, Investor Economics, Market Metrics and Plan For Life. For more information about ISS Market Intelligence, please visit issgovernance.com/market-intelligence.
Subodh Mishra, Managing Director