It’s May 29th, or 5/29 and in honor of the date we’re blogging about Nebraska’s educational savings plan, known as a “529 plan.” The name comes from the section of federal tax code that allows states to establish these plans.
529 plans are a savings account that typically list a child as a beneficiary and are specifically designated for future expenses for higher education. Parents, grandparents and others who wish to contribute to these plans on a child’s behalf receive a tax deduction for doing so.
The savings can then ultimately be used to buy books or pay for tuition.
If you are a recent college graduate or know one, you can probably appreciate that higher education has gotten expensive. Tuition costs have grown significant faster than family incomes over the past couple of decades, leading many students to fill the gap with loans. In 2010, 62% of Nebraska college seniors graduated with debt and the average amount was $21,227.
In many ways, the availability of loans is a good thing, but it also means that a significant number of students are graduating into a less than stellar economy carrying a significant debt burden.
This debt burden is not only a problem for individuals, but it also has economic consequences when large numbers of young people delay home ownership or default on government-backed loans that ultimately become the responsibility of taxpayers.
What’s more is that our economy needs educated workers. A projected 66% of Nebraska’s jobs will require post-secondary education by 2018. In 2010, 37.6% of Nebraskans had some form of post-secondary degree and only 50.2% were projected to have a degree by 2025.
We have to start addressing the issue of affordability in higher education. Government, schools, banks, and families all have a role to play.
The Governor should be applauded for taking an interest in 529s, but in the long run we need more than occasional contests to address college affordability. 529 plans have a role to play in the solution, but we also need to find ways to make them more accessible for all families, especially lower income families who may need college savings more than their middle class counterparts.
Until larger changes start to happen on the college affordability issue, all families would be wise to start saving for their child’s education. And today — 5/29 — is as good a day as any to start.
 The Project on Student Debt (2010)
 Georgetown University Center on Education and the Workforce The Midwest Challenge: Matching Jobs and Education in the Post-Recession Economy (2011)
 American Community Survey (2010) Table DP02
 Lumina Foundation