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The ever-increasing cost of college education in the United States is a major financial concern for many parents, so any financial relief along the way is more than welcome. The nation’s largest administrator of 529 college savings plans is doing its part by lowering management fees for its customers — a move that could prompt other 529 plans to follow suit.
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In an announcement earlier this month, Virginia529 said it would reduce management fees by 46% for all Invest529 clients, effective Jan. 1. The reduction could save clients millions of dollars and also earn them more money in terms of investment returns.
It was the second time in three years that Virginia529 reduced management fees for its Invest529 program, at a time when high inflation is eating away at budgets in many other spending areas.
“Making education more affordable is at the heart of our mission,” Virginia529 CEO Mary Morris said in a press release. “This reduction reflects our continued efforts to maintain one of the lowest 529 fee structures in the country and provide our families with the best opportunity to meet their savings goals.”
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Virginia529’s decision to lower its fees even further could prompt other plans to do the same — especially since Virginia529 is such a big force in the industry. Last year, it became the first 529 plan to surpass $100 billion in assets under management. It has more than three million accounts in its 529 national savings programs, sold directly and sold by advisors.
Invest529 offers more than 20 investment opportunities and is open to legal residents of all 50 states. The plan can be used at eligible educational institutions around the world and has a minimum deposit of $10.
College 529 savings plans have become a popular choice for Americans looking to save money to pay for higher education. Your income grows tax-deferred, and when you withdraw the money, it’s tax-free if the funds go toward qualifying educational expenses like tuition, fees, books, and room and board, CNBC noted.
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Additionally, 34 states and the District of Columbia offer a write-off for 529 contributions as a state income tax deduction or credit, according to Morningstar. The average account size for 529 plans hit a record $30,287 in 2021, CNBC found, citing data from the College Savings Plans Network.
Fees associated with the plans have fallen over the past few decades as tuition fees have skyrocketed. Today, total investment and management fees typically range from zero to 2%, depending on how accounts are managed, CNBC reported.
Meanwhile, the cost of higher education continues to rise. For a typical four-year degree from a state school, you can expect to pay around $100,000 — and much more than for out-of-state public schools and private universities.
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