I wonder if Colleges will allow for at least partial deferring of tuition payment to allow the 529 plans to recover from the losses occurred due to Covid 19.
Colleges allowing attending on credit for a promise of a future payment? No way. Besides, common sense would dictate that a 529 account for a beneficiary enrolled or close to enrolling in college should not be invested in a risky way.
There is no short term recovery coming. Any structured 529 for a kid this near college in an age based plan would have had the very vast majority of the 529 in lower risk or even FDIC type investments. If your investment pathway is still high risk you should straighten that out now IMO.
The 529 has not taken that big of a hit but I am pretty sure that it is going to have more value in 6 to 8 months then it does now.
So for any student who is the beneficiary of a 529 that is at least partly invested in the market, a college should consider allowing deferral of 529 qualified payments until the market recovers? Yeah… I don’t think so.
“Sorry, I don’t want to/can’t pay until the market bounces back… I’m not sure when that will be, but you understand, right?”
That’s basically the risk you take being heavy in stocks right up until the time you need the money. S20’s 529 is in an age-based and was about 80% cash and bonds when the market tanked. He also has an UTMA that his grandparents saved for him that was 100% in stocks. We were putting about the same amount of money in each of these accounts over the years and there’s was growing faster. I almost felt like I’d messed up letting so much be in fixed income the past few years…until this year happened. Of course, their account had grown so much the past few years that even after the big loss it’s still about the same as what I have saved in the age-based, so neither decision was really better than the other.
Really, it isn’t like you take the whole lot out at once, lets assume you are just paying the first semester in fall, your fantasy (sorry) about some big rebound is only going to be short 1/8th or so of your whole 4 yr investment. Your 7/8ths will be enjoying the big gains. Or not. If I had all high risk investments for a kid going to school this fall, needing that money, I would have acted weeks back. If you’re happy for it to all be in high risk, then you are probably not relying on it for this fall.
We just checked the status of our kids’ 529s after wondering how the market hit would affect them. D20’s is largely unchanged, D21’s very little change, S23’s more of a hit, and S25’s is not looking so good. We are hoping the 7th grader’s has plenty of time to recover. We don’t have a lot of money in there, but every little bit helps, right?
I had my D20 and D24 529 plans in an aggressive global age-based stock fund which had done very well over the years but in late March seeing the pandemic effects on the markets, I put all of their funds in cash (FDIC insured account). At that time year to date 2020 they were down about -6% and -15% respectively which I am fine with as the gains over the years have been fabulous.
Later this year, 4th quarter? I may move their accounts out of cash and into a more balanced, conservative portfolio but I’m just waiting this out for awhile. We might be in a deep recession for awhile but no one knows the for sure how investments will play out in the future.
Can 529’s be used for grad school? We originally set up a 529 for our daughter to pay for school but she won a full ride to college plus additional scholarship money from outside scholarship providers.
Yes, they can. You can also withdraw the amount of the scholarships she receives per year penalty free if you want to go that route (you’ll still owe taxes on the gains).
@trippfolsom, yep what @cshell2 said. They could also be used for the next generation or other relatives or trade school or living expenses for anyone you want who’s willing to be a full-time student (which would require 50% of the typical classload).
A 529 is pretty flexible.