In this webinar replay, Steve Galli, Chief Investment Officer and Wealth Management Advisor at Wealthspring Financial Partners, walks through the current college admissions landscape, what four years of college is projected to cost and how 529 plans fit into a family's broader financial plan.
How Competitive Is College Admission Right Now?
The number of college-age Americans is shrinking, and the share of high school graduates enrolling directly in college has been falling for the better part of a decade. Admission to the most competitive schools has grown harder anyway, because applicants are concentrating at the most sought-after institutions while less selective schools draw fewer applications. Acceptance rates across the Ivy League and its peer institutions have declined steadily over the past two decades, and the same pattern now appears at popular public universities.
Students are responding by applying more widely. The average applicant submits nearly seven applications through the Common App, an increase of 46% since 2015-16.
What Do Admissions Offices Weigh Most Heavily?
Grades, test scores, extracurricular activities and demonstrated interest remain the foundation of a strong application. Admissions offices track whether a student has toured campus or spent time on the school's website, so a family with a particular school in mind gains by making that interest visible. Beyond the foundation, an applicant benefits from identifying the one element that sets them apart from everyone with similar credentials, which often becomes the focus of the college essay. That element takes years to develop, so families gain by starting the conversation early.
What Will Four Years of College Cost?
College tuition has risen 914% since 1983, an average of 5.5% a year, outpacing medical care, housing, gas and every other major household expense tracked over that period. A family with a newborn today can expect roughly $631,913 for four years at a private institution by the time that child enrolls. For families with more than one child, college may surpass the home as the largest expense they take on.
How Do 529 Plans Work?
Money in a 529 plan grows tax-free, and withdrawals are tax-free when used for qualified education expenses. Those expenses reach beyond tuition to room and board, books, supplies and certain apprenticeship programs, and funds may also go toward private school before college or certain special needs services. The account owner can change the beneficiary to another family member, which gives a family room to redirect savings when one child's plans change.
529 plans also allow accelerated gifting. Parents can contribute up to the annual gift tax exclusion for each child without gift tax consequences, and a 529 permits five years of those gifts to be made at once, with contributions paused for the five years that follow. Front-loading gives the account more time to compound and can help a family address estate planning goals at the same time. Unused funds may later be rolled into a Roth IRA for the beneficiary, subject to a lifetime cap, with no income limits on who qualifies.
What Are the Disadvantages of a 529 Plan?
Several limits are worth understanding before funding an account. Some states require a state-specific plan to receive any state tax benefit, and some offer no benefit at all. Earnings on withdrawals taken for expenses outside the qualified list may be subject to federal income tax and a federal penalty tax, along with state and local income taxes. Qualified institutions are limited to Title IV schools, which leaves out some career training programs that families might assume are covered, including most police academies. Account assets may be considered in determining eligibility for SSI, Medicaid and other government benefits. A Roth IRA rollover requires the account to have been open at least 15 years, applies only to funds that have been in the account for at least five years and is capped both annually and over the life of the account. Federal and state tax policy remains subject to change by Congress.
Every family comes to this planning with different circumstances, different timelines and different resources. To discuss how college funding fits into your broader financial plan, contact your Wealthspring advisor. To join us for our next webinar, view our list of upcoming events.
Sources
Tuition growth: Bureau of Labor Statistics, Consumer Price Index, and J.P. Morgan Asset Management. Data represent cumulative percentage price change from 12/31/82 to 12/31/25.
Projected four-year college costs: J.P. Morgan Asset Management, using College Board's Trends in College Pricing and Student Aid 2025. Future college costs estimated on average tuition, fees and room and board for 2025-26.
Applications per student: Common App, 2024-25 report.
Acceptance rate trends: National Center for Education Statistics.
529 plan rules and features: J.P. Morgan Asset Management.
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state's 529 Plan.