As college costs continue to rise, more people are opening 529 plans to cope with the higher tuition bills and other school expenses.
Assets in 529 plans reached a record level of $258.2 billion in June, a 5.6 percent year-over-year increase, according to the College Savings Plans Network, an association of the state-sponsored plans. Those figures combine the assets of 529 college savings plans, which offer tax-advantaged investments to pay for qualified school expenses, and 529 prepaid plans, which let investors lock in future tuition at in-state public colleges at current prices.
The total number of 529 plan accounts jumped to 12.33 million in June, a 4 percent increase from June 2014. About 45 percent of those accounts received a contribution in the first half of 2015. Contributions are expected to increase as the year progresses since various tax incentives offered by states require that contributions be made by the end of year.
"Five twenty-nines continue to grow in terms of assets and accounts, and there continues to be an opportunity for future growth within the direct, employer and advisor-sold channels," said Paul Curley, director of college savings research at Strategic Insight, a financial research firm.
Despite the growth, though, most people still don't know about the plans or use them to save for college. Two-thirds of Americans said they didn't know what a 529 plan is, according to a May survey by Edward Jones, and Sallie Mae found only 27 percent of families saving for college use 529s, down from 29 percent in 2014.