It’s not surprising that a majority of Americans say they can’t afford college as tuition costs have soared over the last generation, but a new survey from the financial services firm Edward Jones is striking.
The survey found that a whopping 83 percent said they simply can’t afford the cost of a higher education.
Even more surprisingly, higher income levels did little to move that percentage, with just 37 percent of the highest earning respondents (those making $100,000 a year or more in household income) saying they could afford the cost.
The survey uncovered one big reason for this sweeping sentiment: Two-thirds (66 percent) of Americans still don’t know what a 529 plan is, according to the annual 529 Plan Awareness Survey from Edward Jones.
The survey found that only 34 percent of Americans could correctly identify a 529 plan as a college savings tool (with significant tax advantages and other incentives) from among four potential options, up slightly from 30 percent in 2014 — but down compared to the inaugural 2012 survey (37 percent). These 529 college savings plans were first offered to Americans in 1996.
“Despite headlines focused on the increasingly high costs of college, we still see a significant number of Americans who aren’t aware of one of the most important long-term savings vehicles that can help minimize the impact that the cost of education has on families,” said Steve Seifert, principal at Edward Jones, in a statement.
529 Knowledge Varies by Household Factors
Awareness of 529s varied by several factors including household income, size and number of children.
Respondents with a household income of $100,000 or more were significantly more likely to correctly identify 529 plans (58 percent), than those with less than $35,000 (only 25 percent).
Similarly, awareness also increased depending on household size and number of children. Americans with a household of three or more people reflected more awareness (40 percent) than those with a household of two people (30 percent).
Surprisingly, respondents with children ages 13-17 years were actually less likely to correctly identify the college savings plan than those with children under the age of 13 (35 percent versus 41 percent, respectively).
“Demographically, people are living longer and having children later in life, narrowing the time between a child’s college bills and his or her parents’ retirement age,” Seifert said. “This, coupled with the fact that the cost of college is increasing at a much higher rate than inflation, means that many are grappling with how to stay on track to meet savings goals.”
Here’s the Q&A page from the Internal Revenue Service on 529 college plans.