For decades, parents across the U.S. have turned to 529 plans to help save for their children’s education. These tax-advantaged accounts have long been viewed as the go-to solution for funding college. But as views on higher education shift and financial uncertainty grows, many parents are re-evaluating how — and even whether — to use 529s.
Before even starting a family, Asha Bailey and her husband were already discussing how to secure their future children’s financial well-being. Living in San Diego, they often heard 529 plans mentioned as the responsible route to take.
Curious, they consulted with their credit union to learn more. But when they discovered that 529 funds were restricted to education-related expenses — something their kids might not even need — they hesitated. Bailey, a 29-year-old wedding photographer, explained that while she values education, she doesn’t want to assume what her children’s paths will look like. Flexibility mattered more.
Rather than committing to a 529, the couple opened a brokerage account at the advice of their financial planner. They appreciated the freedom to use the money for emergencies or other life needs — not just tuition.
Once seen as a straightforward choice, 529 plans are now being reconsidered. Though they can cover a wide range of education expenses — from K–12 tuition to college books and fees — they’re still limited in scope. Unused funds can be transferred to another beneficiary, but this doesn’t always align with a family’s needs.
Recent surveys suggest that many parents are looking elsewhere. A Harris Poll conducted with Intuit Credit Karma showed that while 65% of parents are saving for their children’s futures, fewer than 25% are using 529s. Of those who do have them, 19% have closed the accounts prematurely, and 22% have considered doing the same.
A variety of factors are influencing this trend: rising tuition, burdensome student debt, and growing doubts about whether a college degree guarantees a stable career. Many parents are also feeling squeezed — taking second jobs, withdrawing from retirement savings, or delaying retirement just to afford rising educational costs. Over half of parents surveyed by Citizens Bank said they had to explore alternatives beyond 529s and federal student loans.
At the same time, many teens are considering different paths. Trade schools, entrepreneurship, and entering the workforce after high school are becoming more accepted options. Michelle Griffith, a senior wealth adviser at Citi, noted that economic pressures and job market uncertainty have made it easier for parents to de-prioritize college savings.
Part of the problem also lies in a lack of awareness. Many families simply don’t know about 529 plans or misunderstand how they work. Jacqueline Triplett, a college funding strategist, says even many educators she advises are unfamiliar with the specifics of these accounts — or find out about them too late to make meaningful use of them.
Legislation introduced under Secure Act 2.0 has added a bit of breathing room. Families with unused 529 funds can now roll up to $35,000 into a Roth IRA for the beneficiary — as long as certain conditions are met. The account must be at least 15 years old, and the Roth must be in the beneficiary’s name. Contribution limits still apply, and states may have their own additional rules.
Mical Marshall, a mother of two in Kansas City, Missouri, knows firsthand that college isn’t for everyone. Her family had opened a 529 to support her college education, but after she dropped out of community college just eight months in, most of the funds went unused. Early withdrawals meant penalties and taxes, leaving her with only a small portion of the savings.
Determined to try something different for her own daughters, she turned to indexed universal life insurance after seeing advice on TikTok. These policies offer both a death benefit and a cash value component linked to market performance. She now contributes $100 monthly per child and appreciates the flexibility it provides for future needs, whether it’s college or something else.
Still, experts warn that being too flexible can be risky. If parents avoid dedicated college savings and their child later chooses an expensive school, they may struggle to cover the costs. College can still be a valuable path to long-term financial security — a fact many families continue to believe in.
Josh Andrews, a certified financial planner at USAA, reminds parents that education remains a powerful tool for upward mobility.
For Asha Bailey, the decision to use a brokerage account continues to feel right. She likes that the account is in her name, meaning she controls when and how the money is distributed. Whether the funds go toward tuition, a car, or life emergencies, the flexibility gives her peace of mind.
Now, with two young children, she and her husband contribute $500 a month. In just three years, the account has grown by 20%, bolstered by birthday and holiday gifts.
“I hope I’ve made the best choice for them,” Bailey said.
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