National 529 Day: Comparing college costs, then versus now

College costs are on the rise, but a 529 plan can help you be ready for the future

National 529 Day: Comparing college costs, then versus now

Time to read: 2 min

The month of May is filled with celebrations: Mother’s Day, Memorial Day, graduations — and of course, one of my personal favorites: National 529 College Savings Plan Day. Held each May on the 29th (of course), the holiday was originally created to raise awareness of the benefits of 529 plans and the importance of saving for a college education. If you ask me, it’s more than appropriate that this holiday is celebrated in May; after all, you never know how much college costs may rise in the future.

A lot has changed over the years …

From tuition to room and board, college costs have risen steadily over the years, and there’s no sign of a slowdown anytime soon.

Consider this: In 1985, the average cost to attend a four-year public university was just $6,144.1 By 1995, that number had jumped to $27,667,1 and there’s no end in sight. Two years from now, we expect the cost of public school tuition to reach $97,061 — and by 2037, that figure is projected to hit a whopping $222,466.2

The costs of a private school education are even greater. The average tuition for a four-year private university in 1985 was $29,496.1 Fast-forward 35 years, and the class of 2020 will pay an estimated $191,090 for four years of private school. By 2037, that diploma will come with a projected $437,982 price tag.2

Of course, tuition isn’t the only college expense on the rise. In 1985, annual room and board ranged from $2,610 at a public university to $3,660 at a private university.1 Today, the average cost of room and board can be anywhere from $10,800 at a public school to $12,000 or more at a private school.3

Even all-nighters are getting more expensive! In 1985, the cost of a cup of coffee was just $1.23.4 Today, a single latte costs a least four times as much.

Clearly, it’s never been more important to start saving early for a child’s college education. I believe a 529 plan offers several distinct advantages over other college savings programs:

  • Tax-free savings. 529 plan contributions grow tax-deferred, and withdrawals are tax-free as long as they’re used for toward qualified educational expenses (no, the latte doesn’t count).5
  • No income limitations. Unlike other college savings plans, 529 plans have no income limitations on contributions. What’s more, contribution maximums are significantly higher for 529 plans than other types of plans, making them a popular choice for grandparents looking to leave a legacy.
  • Asset control. Another difference between 529 plans and other college savings plans is that the account owner maintains control over the assets. The beneficiary may only apply those funds toward qualified expenses, meaning all assets will go toward the intended purpose — a higher education.
  • Multiple investment options. 529 plans offer access to a wide variety of asset classes. Within those asset classes, account owners can choose different strategies tailored to their individual timelines and risk tolerance, or choose an age-based or target-risk portfolio which automatically rebalances investments based on the beneficiary’s age.

Key takeaway

There’s no way to keep college costs from rising, but by planning ahead for higher education expenses, a family can take full advantage of the power of compound savings over time. Celebrate National 529 College Savings Plan Day by talking to your financial advisor, or visiting, to learn more about saving for the future with a 529 plan.

Read more expert views on college savings plans.

Important information

Blog header image: ESB Professional/

1 Source: National Center for Education Statistics, “Average undergraduate tuition and fees and room and board rates charged for full-time students in degree-granting institutions, by type and control of institution: 1964-65 through 2006-07.” Data retrieved June 6, 2016.

2 As of June 6, 2016, assuming a four-year, public, in-state school with a 5% tuition rate, one year until college and eighteen years until college using pay-for-college-costs calculator.

3 Source: CollegeData, “What’s the price tag for a college education?”

4 Source: Go Banking Rates, “The price of coffee the year you were born”

5 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

For more information, refer to Internal Revenue Service Publication 970.

Thomas Rowley

Director, Retirement and Education Strategies

Thomas Rowley is director of retirement and education strategies and one of Invesco’s most frequently requested speakers. He provides analysis of the evolving retirement landscape and develops actionable strategies to help investors and financial advisors maximize their retirement-planning opportunities. Mr. Rowley regularly shares his insights online at in addition to his speaking engagements.

Mr. Rowley’s insights reflect more than 20 years of experience in the investment industry. He translates his comprehensive knowledge of retirement planning into lively, clear explanations of the complexities of legislative, investing, tax and social issues.

Mr. Rowley shares his analyses of retirement-related issues through regular personal appearances, continuing education webinars and Web-based commentaries.

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