Gov. Tony Evers designated September as College Savings Month in Wisconsin Sept. 1 to encourage Wisconsinites to save for higher education through the Wisconsin 529 College Saving Plan.
According to the University of Wisconsin Student Success Through Applied Research Lab, the average Wisconsin resident with college loans carries more than $32 thousand in debt as of 2020.
The Wisconsin 529 College Savings Program aims to encourage Wisconsin students to strive for post-secondary education by lessening their reliance on burdensome student loans, according to a press release from the State of Wisconsin Department of Financial Institutions.
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Wisconsin’s 529 College Savings Program offers two plans, the Edvest 529 and the Tomorrow’s Scholar plan, which are both highly-rated and known for offering an effective and low-cost solution to saving for post-secondary education, according to the press release. Edvest is direct-sold to account holders, while the Tomorrow’s Scholar plan can be accessed through a financial planner.
State of Wisconsin Department of Financial Institution College Investment Program Finance Officer Cheryl Rapp said parents can set up a 529 account to begin saving for their children’s college education. Or, high school and current college students can set up plans to fund their undergraduate and graduate tuition.
“The funds that are from a 529 can be used for any university, community college, technical college, professional schools nationwide and abroad, as well as apprenticeship programs that are registered with the Secretary of Labor under the National Apprenticeship Act,” Rapp said.
UW Professor Emeritus of Public Affairs and Applied Economics Andrew Reschovsky said a 529 plan is not a typical savings account. The 529 is similar to an Individual Retirement Account, or IRA, where money is invested into financial securities. This allows the initial investment to grow in accordance with the general market.
Income earned and purchases made with funds generated by these plans are tax-free if used for school related expenses like supplies and tuition, Rapp said.
Reschovsky said wealth earned through investing in a 529 plan grows faster than a typical financial portfolio because account holders don’t have to pay state or federal income tax on income gained.
Each 592 account is managed with a different level of aggression in the market. Young accounts, that still have 18 or so years left until the account owner starts to take money out of the account, are managed more aggressively, Rapp said. When the account is almost ready to have money taken out of it, the investment strategy becomes more conservative to ensure account holders don’t lose money in the market.
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“You’ve just had a kid or your kid is five years old, start investing now, put in some amount then commit yourself to every month put in a certain amount,” Reschovsky said. “You invest it in a mix of stocks, equities, and bonds, it grows over time … 18 years later, you have a quite substantial pot of money that ought to go a long way towards funding … education costs.”
According to the Edvest website, if an account holder invested $5 thousand upon opening the account and contributed $100 a month for 18 years, their savings would be more than $50,000 given a 6% return rate.
There are also 529 programs in nearly every state, Reschovsky said. Wisconsin’s program is through Edvest, unlike other states.
To promote College Savings Month, the College Savings Plan Network is hosting a sweepstakes giveaway throughout September for those who open up a new 529 account, Rapp said. Nine winners will receive an account deposit of $529, according to the press release.
“Through the Wisconsin 529 College Savings Program, we’re helping more students develop a college-bound mindset early in life and helping them avoid an overreliance on student loans later in life through a well-planned higher education savings strategy,” DFI Secretary-designee Cheryll Olson-Collins said in the press release. “Saving for higher education increases the likelihood that a student will enroll in post-secondary education, and research suggests that having just $500 or less in savings significantly increases the likelihood of both enrolling in and graduating from college.”
