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Paul Curley: [00:00:00] Yeah, there’s a couple different really in interesting, pieces of information and data that we have come across. One is that most five 10 plans you can start with just no, no money down. So no, no initial payment. And the average family puts in $6 a day for education. The median account size is roughly $10,000, based on college savings, foundation research.

So we’re talking about very average levels that we’re not talking about a hundred, $200,000 that people are starting accounts with. We’re talking about, starting with even zero, many times and $6 a day and putting it on automatically over time.

Jonathan Hughes: Hi everyone and welcome to the MEFA Podcast. My name is Jonathan Hughes, and you just heard from our guest on the show, old friend of the show, Paul Curley. So we are posting this episode in December, that time of year when we’re all scrambling for gifts, preparing for the new year. Taking stock of where we [00:01:00] are and looking ahead to the year to come and all these things make it a natural time for us to talk about college savings, specifically five 20 nines.

And we’re going to hear from our guests today about the rise in popularity of 529 plans for families and how they prepare for the future, whether that’s college career training, K through 12 tuition and expenses. Or more, but as popular as five 20 nines have become some pernicious myths still exist, myths that may be keeping some families who want to save and should be saving from opening that account.

So today, Paul is going to help us break down some of those myths. So without further delay, let’s get reacquainted with our guests on the show.

Paul Curley: I’m Paul Curley. I’m the executive Director at ISS Market Intelligence, where I oversee data research events and thought leadership on 529 plans and able accounts.

I’ve been in this role since 2010 so at this [00:02:00] point, 15, 16 years, data dedicated to helping families and all the different stakeholders save and pay for education and now able as well.

Jonathan Hughes: I wonder if you could tell folks just a little bit more about ISS market intelligence and what.

What it is that you actually measure a about five 20 nines, about the 529 field as a whole. And what does that tell you right now about what’s going on

Paul Curley: For us we track a number of different data points across the 529 enable industry, but broadly speaking, what we have seen is that more people are saving in a qualified further qualified expenses, for 529 and education and broadly speaking, more families are saving and paying.

With 529 plans more there’s a broader demographics of families that are using, leveraging five two nines to help them save and pay for education. And broadly speaking, as because I started covering five two nines in 2010, that there’s just much more families.

Saving and paying for education. Now, when I first started in 2010, there was roughly 120 billion [00:03:00] in assets. Now we’re getting closer to almost 18. 18 million account users investing roughly almost 600 billion in assets. And with that, we’ve seen a increase in scale, a lot more different providers.

Just really having the scale to do the just the economies of scale, just making the. Ease of use and improve for more families.

Jonathan Hughes: So we talked about the success of 529s and how they’re growing. But with that even, there’s still some people that maybe are held back by some of the myths, about 529s.

And so my idea was to have you on here and to address some of those things yourself. So I want to start with a really big one, and that is. I don’t have enough money to open a 529 planner. I don’t have enough money to start saving for college.

Paul Curley: There’s a couple different really in interesting, pieces of information and data that we have come across.

One is that most five 10 plans you can start with just no, no money down. So no, no initial payment. And the [00:04:00] average family puts in $6 a day for education. And, lo and behold it’s, actually less than the cost of coffee. 2010, that was probably less than the cost of coffee nowadays.

But now. Now elastic, $6 a day, is a very reasonable sort of amount for the average, family. But I do think it is interesting. There are a number of families that say, there’s just so much market volatility, just so much, fear going on in, in the market.

And lo and behold, one of the best. Passive ways to, fund a 529 account is through, say Fidelity’s 2% back credit card. If you don’t have any money to save, that’s a very passive way to, just get 2%. O over time and over the course of 18 years, if it’s about, $1,000 a year.

That will pay, for at least in, in my state of Pennsylvania, that’s one year of tuition for an in state. And what’s intriguing is that one, you one can put 529 use 52 9 assets to pay off student loans now. You can use it for you saving 18 years until the child’s in college.

You can use it for the, for or however many years [00:05:00] it takes for them to go for undergrad and grad school more and then than after for student loans as well. Start small, dream big, the average the median and account size is roughly $10,000, based on college savings, foundation research.

So we’re talking about very free average levels that we’re not talking about a hundred, $200,000 that people are starting accounts with. We’re talking about, starting with even zero many times and $6 a day and putting it on automatically over time.

Jonathan Hughes: Yeah. And I wonder if we could even go back and take it a little bit more basic for a minute.

And that is, it’s not just the money that you put into the account because it grows. So can you just explain how money would grow in a 529?

Paul Curley: So one puts, money into the 529 account, roughly 32 states do offer a, say, tax incentive, whether it be a credit or deduction.

So say you put, $1 into the account and then maybe they, there’s a, say, tax deduction or credit that they can put that money into the account as, as well. And then over time, depending on the type of investments one invest in that, that over 18 years. [00:06:00] That, broadly speaking, based off of the CFA institute and in most market metrics that the account, could, vary much on a baseline normative statement that s and p 500 say increases 6% every year.

And that, that amount, that end balance over that after, at the end of 18 years. If used for a qualified expense, comes out without any tax or penalty, I, as long as it’s for a qualified expense. You put the dollar in and many times that, that amount grows to much more than the, that initial balance.

And if not, you at a very basic level, get the state tax deduction or credit. And, for those in the 32 states, you get that performance increase over time. And yeah, that’s a, that’s. A dollar saved is, grows to $2 and that’s, $2 that you don’t have to borrow for student loans and pay back over much longer, period of time.

So it’s a dollar saved is much more than a dollar or down the road.

Jonathan Hughes: Yeah. And you mentioned student loans and that leads us into our next sort of myth, and that is five 20 nines are only for people [00:07:00] who are certain that their kids are going to college, right? So we hear this all the time.

People say I don’t know. Maybe I should know, open it because I don’t know that my child is gonna go to college. What would you say to that family?

Paul Curley: Yeah, the, that’s probably one of the more exciting areas of just 529s overall that, one can, use the assets saved, for college.

And a lot of times, even the word college thinks about undergrad or graduate school as well. And over time we’ve seen that even expanded to apprenticeships, so that many families may say, Hey, I don’t know if my child will go to college, but apprenticeships is a great second round. And now that’s a qualified expenses called a qualified expense at the federal level.

It’s also new this year’s credentials and credential programs and, thinking about C-F-A-C-P-A nurses, teachers, and all these different other. Credentials and credential programs that, that, the different professions do you gather along the way? So in many ways as a continuous education opportunity as well.

At the younger age, there’s the K through 12 and more recently in 2025, there’s an expansion to more K through [00:08:00] 12 related expenses, even including saving and paying for SATs, a aps and entry exams like that. You know of course if one were not to, use the, those assets for all those different educational expenses and that is a very wide set of qualified expenses.

We, we have this great opportunity as well to save and pay for funding a Roth IRA so one can you know, really, get ready. For that retirement side. So no matter which direction your, child or loved one or grandchild may go that there’s definitely many different options to, to use that amount saved, that it won’t be stay wasted or not used.

Jonathan Hughes: And is this something that you’re seeing on your end on the ISS market intelligence sort of research and that people are using the 529s for these sort of expanded uses, K through 12 career training, et cetera?

Paul Curley: And it, it does take time for more and more families to understand and see.

Yeah, some of this is new this year. Yeah. It’s cutting nudge. I would say, based on our, off of our survey of parents and advisors, that it is roughly 10% as of today that are [00:09:00] using it, beyond the. College or grad school route. You know that’s a, a very good benchmark, given the newness.

And obviously these are goals that take many years to get to. But, lo and behold it’s a very popular tool. To get people to start to use it. But also, when we do a survey of parents and families and advisors, how do you plan to use it?

We do see that, that, that intent of that, 10 and we can see it go to 15, even 20% of the accounts just because it’s. We all like flexibility, especially in, today’s world. So it’s a great achievement overall.

Jonathan Hughes: Yes. And that’s, that, that’s the, those are the numbers because we presented on these numbers. Those are the numbers of folks who plan to use the funds for one of these new expanded uses that I was thinking of. And actually it obviously made me think of it because I personally. Use my 529 to pay for K through 12 expenses for my son. So definitely grateful for that opportunity.

So much more than just college. The other thing is, as you mentioned, there were 34 state tax deductions available for 529 [00:10:00] plans, and that’s because, 529 plans are administered at the state level, right? So each state has their own 529 plan, sometimes more than one.

But just because you’re in a particular state doesn’t mean you have to open that state’s plan. So how do you know which plans are going to be the best for you?

Paul Curley: And in many ways, as the first one is don’t leave money on the table. So if your state does provide that instate tax, deduction or credit, definitely like to, take advantage of it.

And even, sometimes I think sometimes we focus so much on, on the state benefits, but that federal benefit as you can see, is. It’s phenomenal that they get that federal tax deferred growth. And in many ways it’s just getting to the stage of saying Hey, I want to open up 529 plan and moving towards saving like you’re already winning.

Opening up that account and funding it on that automatic contributions and putting money along the way is the winning way, but. So I as with any purchase I think a lot of people say, choose three different options and compare. Look at the plan disclosures.

Look at look at the [00:11:00] information there. And, perhaps your first one is with your in-state program, you know it, and. I’m not being paid to say this, but I would also say, take a look at MEFA’s programs, the, they do have a prepaid program.

They do have a savings program. And so perhaps those are great options as, as well. But, in, in many ways, use the one that you feel comfortable with that, that you feel confident with, that, perhaps you have a retirement account with x, y, Z plan and you feel comfortable with the, with their call center investment lineups and just their ease of use.

You’re just very satisfied with them. You can ask them if they do have a 529 plan and, to that response. Perhaps it’s, when I say them may, maybe that’s your advisor. Maybe that’s your, maybe your employer has is able to do a training program. I’m sure MEFA has a great team that would be ha to do an employer, training, program as, as well.

But so I do think there’s a number of different ways, to gather that information, get three options, look how, look and see how they feel, look at their websites, plan disclosures, and if there are certain factors that are just, really important to you then do take a look at it.

Jonathan Hughes: [00:12:00] So now the next one isn’t quite a myth per se in terms of they’ve got the wrong idea about something factual, but it’s a, it’s an idea that 529s are complex. This is going to be very difficult to do.

Paul Curley: Are very, simple and easy thing to do that as with anything you can, set up an automatic contribution.

You can, select the percentage and put the money into the account. And, I think that, select the plan. You can, call them up, you can look online and they’ll answer your questions to, help you open up the account and fill out the different forms.

One of the stopping points, does tend to be the investment lineups and there’s, as with many investment lineups, whether it be retirement or education, that there’s the target date or enrollment date investment options that keep things, very simple to you.

But perhaps there’s, different information online for that component. 529s a little bit whole are very simple. You open the account up you set up the automatic contributions in most plans make it very simple to, to [00:13:00] allow gifting and just it’s a eight 18 year road.

So just keep it simple is probably the best route to, go. And in many ways it’s. It’s just thinking about even James Clear, just that 1% think thinking 1%, just perhaps the 1% for one year is just opening up the account and putting in the initial funding.

And then year two at, setting up the automatic contribution and slowly but surely over time and increasing that savings rate. Or, maybe over time you think about. Putting in, gifting options. And once you see the account, once you see the growing, you get the excitement and you’re getting the tax deductions or credits and you’re, you see it and then, just putting the money in and it’s 18 year road In many ways the road to the Boston Marathon is really just one step and. How do you run the, a marathon one step at a time? And that’s how one can achieve it.

Jonathan Hughes: So yeah, I want to go back to something you said and just talk about it for another minute. And that is the investment lineup piece, right? Because we know that is a part where people stop during this.

Paul Curley: And based on off of our data and research what most [00:14:00] families do. Roughly, two thirds of what families do in the Drexel space is to invest in, in age-based target enrollment date, type of investment options. These are types of investment options that will automatically, de-risk as one approaches the.

It projected, data use. And so in many ways, most families, are using these very simplified, pre, pre-created types of investment options in many ways, like a pre-created recipe. So in many ways it’s a, it’s a hard. The hard work and hot hard lifting is already done.

The second type of investment option that is, fairly popular is a target risk type of investment option. Some people just say, I want the, conservative investment options or moderate level of risk or, I’m really aggressive. So here’s your aggressive, track.

So there’s the ones that focus more on, on the enrollment date saying this is when you’ll use it. Then there’s the target risk one, and then there’s also an individual investment options, which perhaps there’s someone that, that wants to have a little bit more of an allocation to [00:15:00] that, let’s just say like a ESG, friendly type of investment option or a certain type of investment strategy that’s more, attuned to their, to their beliefs.

That’s that route. And it really does allow for all the different type of types of investors. Say you want your easy button, your target risk is there. Say you want your easy button is a little bit more, I want to go aggressive because I have other types of investments or emergency funds or different types of things that the target risk gets a great category.

And, for those that have a little bit more of a, focused interest or appetite for dipping their toes in a little bit more, then. There’s the individual types of investment options

Jonathan Hughes: And the, the resource for this to explain these options is the program manager, correct?

Paul Curley: Correct. The plan disclosure statement is the key document that has all the information all the plan websites, should have a button on the top that should help you navigate to investment option tabs and that will go. Very deep in, into the investment options, but every single 529 plan needs to have a plan disclosure.

And that plan disclosure does have [00:16:00] the have the, all the important components needed to use those types of in investment options.

Jonathan Hughes: The big myth that we run into, at least at MEFA, is that people think that you’re penalized for having college savings when you apply for financial aid.

Paul Curley: I think for financial aid there’s most families take a third take where you’re one third of the total no cost, one is through savings and paying, whether it be for 529 plan, one third, with their, your current income and one third through borrowing and to that extent that it’s just.

Important to, to save and to take advantage of those tax deductions and tax breaks. Inversely just the more saved, the more options, the more flexibility in school that you have in this school section and, broadly speaking the less stress that you have overall.

I just think that, having 18 years to, to plan for four years is. Is very easy. I would almost coin the term lazy. I don’t mean the, in the most be way, where, at birth you set up the account, you put in [00:17:00] 3% savings rate for the child, and it’s just you’re watching it, watching the account grow and you have the options, to, to select the schools that, that you want.

When they do go to when they do select their schools. But in many ways, as we had, gone through before, Jonathan, it’s like the, you put in say like $7 and it’ll grow to 10, $10, by the time that the child goes to college. And that’s a lot easier than, borrowing 10, $10 and paying back maybe $13.

So it’s really. Just it’s a lot more, feasible from, just a simplicity perspective. You paid less overall. And of course, in, in 2025, there’s just so much different volatility going on. It’s better to, have more control over, over where, how you save in pay for education and, and in many ways there, there’s like another myth of.

Just because your family is eligible to get financial aid doesn’t mean you’ll actually receive it or even receive the full amount. And in many ways that, that, that amount you receive is a loan that you do have to pay back. So in many ways it’s [00:18:00] it is part of the, process for most families, but to rely a hundred percent on student loans that I, I think that is you’re just, pretty stressful from that perspective that many families just want to be able to, save over the 18 year window and then still take out loans and repay and that, that seems to be the game plan for most families.

Jonathan Hughes: No, that’s a great point. And you did a great job fielding that. I gave you a MEFA question there, so I apologize. But that’s a great, I’m glad you raised that. Just because you’re eligible for this financial aid doesn’t always mean that you’re going to get it. In fact it’s more common to not receive all the financial aid that you’re eligible for.

To that, I will just add the general point that. When they’re figuring out your financial aid, they’re going to base that mostly on parent income and not on savings. So your savings will have a greatly diminished impact on your financial aid to the extent that they look at it. So it won’t, it, it should not significantly penalize you for having college savings, not nearly to the point of coming close to neutralizing the benefit of having the savings, bearing in mind the [00:19:00] time of the year that we’re in.

I’ll break the format here towards the end and just say that we’re recording this just before Thanksgiving. It’ll be out in December. And this is the time of year when we do talk about college gifting. And one of the things that we like to stress at MEFA is that parents do not have to take this.

Sort of burden of saving for college on a loan. And so whether it’s through Fidelity and their gifting page that we offer for the U fund or gift of college cards that Mefa offers both physical cards in stores or virtual cards that mefa.org, we try to make it easy to do that. Do you have any insight whether it’s, through your ISS market intelligence data or.

Anecdotally, personally on gifting contributions into five 20 nines as a gift around the holiday season,

Paul Curley: Around the holiday season, about 5% of the contributions going to the accounts are from, friends and family. And so gifting is definitely a [00:20:00] popular thing that is taking place, especially in the December year end type of opportunity.

And it does align with saving and paying for education is a family goal that the, that saving and paying for, your children or grandchildren to go to, go to college or nieces and nephews, to go get their education and training is a family goal.

And in many ways, it’s a much more of a long lived goal that, some education, pays the dividends over the entire lifetime where, perhaps those plastic toys may last a season if that. So it’s a. Great opportunity to, just get families to make the contributions and then over time as you did, mention, it has become easier.

It used to be the physical gifting was this physical check app, 10, 15 years ago. And now there’s all these different great options and partnership options that you and MEFA team does have and implement. So it’s a great development for the industry and just very timely as well that does help.

A lot of families and as you said, yeah, it’s 5% of the money coming into five nines in December is from friends and family. And if he told me it was much more then I would agree so as [00:21:00] well. So

Jonathan Hughes: knowing the big picture as you do thinking about the future of 529, saying about where we’ve been and where we’re going is there anything else that that you’d like to say before we go?

Paul Curley: Yeah, 529s continued to grow to help more families. We’re expecting it to be a trillion dollar industry. And 20, 32, around, around that timeframe that, more and more families are using the, five, two nines with expansion of qualified expenses.

The product continues to become easier and easier. The gross sales continue to increase. The distributions are increasing, which shows that more and more families are becoming familiar, with their usage. So awareness is increasing. And the momentum is on our side. The mo most important, critical piece that, whether it be families or families, grandparents, friends, advisors, employers, they see the value and importance of education and continuing education and training.

And to that extent, people are, continue to save for it. Lo and behold my final statement is start small, drain big and you can achieve your goal.

Jonathan Hughes: Alright, we’re always excited to have you, [00:22:00] Paul. Always excited to work with you in any capacity. So thank you so much for coming on again and look forward to the next time.

Paul Curley: Thank you.

Jonathan Hughes: All right. That was our show everyone. I would like to thank our guest, Paul Curley, for sharing his time and his expertise with us. Paul, always great to have you on the show. And we’ll do it again soon. And folks, if you liked what you heard today or what you saw on the show and you want to hear or see more from us on planning, saving, and paying for college and career readiness, then you can follow the show and you can do that wherever you find your podcasts.

And please remember to rate and review us. It helps us to keep doing what we’re doing and getting this show out to folks like you. Oh, one more thing. You may have noticed that we spoke briefly in this episode about gifting and how parents don’t have to take on the endeavor of [00:23:00] saving on their own.

And if that interested you. Scroll back one episode. We did an entire episode on this topic with Gift of Colleges, Patricia Roberts. You’ll like that one as well. Okay. I would like to thank Shaun Connolly, our producer. I’d like to thank AJ Yee, Meredith Clement, Christina Davidson, Lisa Rooney and Lauren Danz for their assistance in posting the show.

Once again, my name is Jonathan Hughes and this has been the MEFA Podcast. Thanks.