It may come as a surprise to no one, but Gen Z looks at their future prospects a little differently than the generations who have come before them. The route to post-high school education continues to evolve as educators, parents, and students redefine success. Some parents have been saving for their child’s education years before starting a family, while others started saving later, and still others fear it may be too late to begin. With rising college tuition costs and hidden expenses, the fear is valid but not insurmountable. The cost to attend a traditional four-year institution is increasing at an average rate of 8% annually, meaning the cost of college doubles every nine years. Fortunately, there are many different paths to success and 529 accounts can help every step of the way.
Students Share the Financial Burden
A 2023 Sallie Mae study revealed that 56 percent of families rely on their students to help pay for higher education in some capacity. The good news is, as students prepare for the next steps in their education, they are also thinking about financial feasibility, responsibility and their futures. According to research by the College Savings Foundation, Gen Z students want to work and help pay their way. And if you’re wondering what students want for their birthdays and graduations, 73% say they would prefer contributions to a 529 account rather than material gifts.
Community College Enrollment on the Rise
Attending community college first is another way to alleviate some of the financial burden of higher education. In the fall of 2023, community colleges saw a 2.6% increase – 118,000 students – the highest increase in any higher education sector. Depending on your student’s chosen path, attending community college for two years can save your family up to $50,000, making it a cost-effective first step toward a degree.
The Trade School Trend
A more significant percentage increase, vocational-focused community college jumped 16% last year, the highest recorded increase to date. Trade certifications often offer flexible learning options and students have more of an opportunity to set their schedule and pace. This can potentially reduce the time needed to earn a credential, making it a more affordable option. Many trades also offer apprenticeship programs, through which the apprentice is earning an income while also learning their trade.
Recent reports indicate Gen Z sees the most potential in the trades, earning them the nickname of the “toolbelt generation.” According to a USA Today survey, 83% of Gen Zers believe that learning a skilled trade can lead to better economic security than college, including 90% of those who already have college degrees.
Think of the fastest-growing trade in the U.S. right now – wind turbine technicians. At the highest pay level, wind turbine technicians can make over $100,000 per year. By 2032, job growth is expected to increase by 45% and most trades are expected to follow a similar upward trend.
Deciding on the Best Path for Your Family
No matter the direction your child chooses, a flexible 529 savings plan can accommodate your child’s personal dreams and professional goals. Money invested in a 529 account can be used at in-state, out-of-state, public, or private schools, as well as community colleges, trade schools, graduate programs, some international schools, K-12 tuition, registered apprenticeship programs and certification programs. Plenty of resources are available at your fingertips to help plan your savings contributions or estimate your child’s financial aid eligibility.
529 accounts can also be used to pay down student loan debt up to $10,000, a significant dent in the national average of $28,940 as of 2024. And, beginning this year, unused funds from a 529 account can roll over to a Roth individual retirement account (IRA) in the account beneficiary’s name without incurring tax penalties.
While the educational landscape will continue to shift, it’s never too early or too late to start saving for the future.
