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Save For A Higher Education In Times Of Uncertainity

529 Tips

Saving For Higher Education In A Time Of Uncertainty

During these turbulent times, it’s completely normal, natural, and human to be worried about your savings and investments, including your 529 account. At Ohio’s 529 Plan, we understand.

We join our voices with many others: Do not make decisions out of a state of panic. Swings in the stock market are normal, and the market usually recovers over time. There is much for you to consider before making a move.

You started your 529 plan with the long-term focus on paying for your children’s future higher education expenses. Keep your eyes on that goal. We know that every family’s situation is different. If possible, stay the course.

Here are some considerations to protect your 529 account.

Age-based options

Over 60 percent of current Ohio Direct 529 Plan account owners have chosen to save in age-based investment options. For Ohio’s 529 Plan, these options include Advantaged Age-Based Portfolios (AABP) and the Vanguard Ready-Made Age-Based Portfolios. Both portfolios reflect college-savings industry standards of smooth glide paths, which determines the asset allocation mix within an investment option.

An age-based 529 portfolio creates an asset allocation mix based on age bands. When the beneficiary is young, there are more equities found in the portfolio. As the beneficiary grows older, the mix adjusts with each new age band, reducing the amount of equity and increasing the amount of more conservative investments such as fixed-income and cash preservation options.

A majority of current CollegeAdvantage account owners have opted to save in an age-based option. If your family is closer to using your account to cover college costs, the age-based portfolio has been transitioning over time to more conservative, cash-preservation funds instead of equities. This can help minimize the impact of market volatility on the bottom line of their 529 account. If your beneficiary is young, while age-based options do contain more equities, your account will have time to rebound as markets recover.

If you would like to learn more about our age-based products, we have an article describing how these investment options work.

Dollar-cost averaging

Dollar-cost averaging is an investment strategy. With it, when you contribute regularly to an investment, you will buy shares both when their costs are higher as well as when they are lower. In general, during a market like this, your dollars will purchase more shares while the market is down. This process can allow you to end up with more shares of these investments at a reduced cost. When the stock market stabilizes, you will likely have more in your 529 plan that is ready to grow.

If you are able to continue contributing to your Ohio 529 Plan now, you will still be able to take full advantage of the up to $4,000 state income tax deduction to help your bottom line during next year’s tax season.

Need to start making 529 withdrawals soon?

If your child is currently working on their higher education or will be starting this fall, we understand that the current market may be worrisome. There are some alternatives to consider while you wait for the stock market to settle.

  1. Hold off tapping into your 529 plan to allow time for the markets to recover. Use other resources or other savings to cover the first round of higher education payments.
  2. During this time at home, have your student apply for more scholarships. Many free resources collect scholarship information, like Sallie Mae Scholarship Search and FastWeb. On these sites, your child would create a profile with their academic scores, community service and volunteering, athletic and academic activities, and they will be matched with scholarship applications for which they are eligible. You can also learn more by visiting Federal Student Aid, an office of the U.S. Department of Education. This is the federal agency for which you will complete the Free Application of Federal Student Aid (FAFSA), to determine how much federal financial aid your student may receive. The agency also offers guidance on scholarships, including what other sources to tap for more information, including the free scholarship search tool from the U.S. Department of Labor. also curated a list for the more unusual scholarships that are available.
  3. Select a less expensive school option. As an alternative while you allow your finances to rebound, talk with your student about the practical costs of college and attending a school or program with lower tuition costs. If they want to attend an out-of-state school, look at in-state options to reduce expenses. Community colleges are an excellent option to use your 529 plan, where your student can pursue their higher education at a lower cost. Or consider having your student stay at home while in college to reduce room and board expenses.

If you’d like to read more about saving in 529 plans during downturns, nationally syndicated personal finance columnist Michelle Singletary of the Washington Post shares her thoughts. Shannon Vasconcelos, a college finance expert at College Coach, also lists some issues to consider when deciding whether or not to keep funding your 529., a trusted college-savings industry resource, had these recommendations on protecting your 529 plan during these times.

We cannot and do not provide investment advice, so you should consult your financial advisor or tax consultant about your personal situation and savings goals.

We will weather this storm together. Someday your child is going to college. Someday starts today with

Posted on March 30, 2020

Ohio Tuition Trust Authority

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