John Hupalo, host of MyCollegeCorner’s podcast, recently sat down with Paul Curley, Director of 529 and ABLE Solutions at ISS Market Intelligence and generally regarded as a 529 data guru, for a deep dive on the extensive and broadening benefits available to families and college-bound students through these groundbreaking and smart savings platforms.
To see the full interview:
JH: We’re preparing for the college savings industry’s big drum roll to May 29th. Numerically, that’s 5-29, so 529 Day is a thing for the 529 industry. And we have the right guy to talk to us about 529s. It’s not unusual for my guest to tweet at 529 in the evening or 529 in the morning for that matter, or to note that he paid $529 for an airfare to a 529 industry conference. Today’s 529 data guru Paul Curley joins me in My College Corner. Paul, welcome.
PC: Thank you, John, and thank you for the opportunity.
JH: For those who don’t know you, I’ll just give a little background. You are the Director of 529 and ABLE Solutions at ISS Market Intelligence. You’re a member of the Municipal Funds Securities Advisory Group. You created and are the Editor-in-Chief of the Industry newsletter 529 Dash. And you run the 529 industry’s largest and best attended conference every year. So no exaggeration, Paul, we all know you are the go-to source for market data on 529 programs. Thanks for all you do for the industry.
PC: Thank you, John, and thank you for your energy as well.
JH: Paul, I learned something on LinkedIn the other day which I thought was extremely impressive. I’m not sure all your professional colleagues know this. So when I saw that you were involved with the Publicity Committee for Cub Scout Pack 100, I said I just gotta ask you about that. We know you’re a real family man. Just tell us a little bit about what you do outside of work.
PC: I go for a run every single morning. Of course, that’s why I’m able to get the 5:29 AM post in in the morning. I have a daughter who’s now 12 and a son who’s now 7 and so raising them is great, being there. It’s great to live close, near my family in in Philadelphia. I was born and raised in Massachusetts.
JH: That’s really special, Paul. Let’s kind of dive in a little bit to what we’re talking about. In the 529 Dash newsletter not too long ago you wrote something that kind of hit the nail on the head. You said that 529s are no longer the ho-hum investing device for college. Let’s peel back the onion on that a little bit. You’ve been in the industry for over 15 years. You have a lot of perspective on this. Take us back to around the days of the financial crisis, 2008, 2009. What were roughly the assets under management in these programs then? The number of accounts? What did the industry look like back then?
PC: Back then, the assets as of the second quarter of 2010 were $117 billion and since then it’s almost at $500 billion in assets. So the assets continue to grow. There’s a lot of market volatility, a lot of discussion around the short duration investment options such as money market stable value and FDIC-insured. But since then, the number of accounts have continued to increase from 9 million back then all the way up to 16 million nowadays. So it’s been a good ride. It’s been growing quite well. And John, as your book says, it’s important to plan, save, succeed.
JH: Well, thank you for that, Paul. You saw that evolution and it was four times or so growth in the assets under management. We had a big run-up in the stock market then. But we’ve also seen a big increase in the number of accounts. What do you think drives those numbers? Why have we seen such a big increase over the last 15 years or so?
PC: Probably there’s a couple of different factors. One is just the awareness. People use them, people have been putting the money in, saving, using. And so as they’re out longer and as there’s more success stories of people saving and paying for education, there’s that natural loop.
That being said, I think also the big story of the day is probably the broadening of the demographics to apprenticeships, to all these different use cases. So as the use cases broaden, so does the usage overall.
There’s also just more scale to make the technology enhancements, to improve that ease of use. So it’s nice to see, for example, there’s been a number of plans that launch mobile apps to make it easy on that side of the coin as well. There’s a number of things working on the product marketing distribution side. And I would also say there’s a lot more opportunity to continue to grow. There’s roughly 14-15% of families currently with a 529 plan. And so from that perspective, as much as the 529s continue to succeed, the opportunity for growth continues to be there.
JH: It’s interesting, Paul, the way you frame that. I think of it in terms somewhat similarly that there are program changes and you and the College Savings Foundation and College Savings Plan Network with the National Association of State Treasurers have done a lot of work, particularly over the last five or six years, to broaden the use cases of 529s. So, like you said, now you can use them for apprenticeships. You can use them for tuition payments on K through 12 programs. You can pay off up to $10,000 of student loans. I think that’s all really spectacular.
But last night I was watching Shark Tank and, sure enough, for Financial Literacy Month, one of the local TV stations ran a PSA about 529s. And the lead of that was not tax-exempt, it wasn’t any of the things that the industry talks about. The lead was Roth conversion. Do you think that’s going to be a really significant movement or driver of future growth in the 529s? And maybe for our audience just talk a little bit about what the Roth conversion is all about.
PC: There are expanded capabilities for 529 plans, as we’ve covered, in terms of for K through 12 and apprenticeships and student loan repayments. But now, there’s this newer provision that went into effect this year in terms of being able to distribute 529 assets over to Roth IRAs. There are 6 bullet points, and there’s more to come in terms of the detail, like a 15-year holding period. But lo and behold, I think there’s this great psychological impact and gain to be had in terms of “what if my child doesn’t go to college”. For example, say they become disabled. Now you can roll it over to ABLE accounts. What if they go to trade school? Well, now there’s the apprenticeship piece. You think about all these different scenarios. And what if they just don’t go to college at all? It’s like all of a sudden, you can roll it over to the Roth IRAs. Because no one saves enough for retirement. So there’s just all these added functionalities.
Broadly speaking, the market data kind of points towards a use case of maybe 1% of accounts and assets being used for this purpose. So there really won’t be too much drag in terms of growth from that perspective. But I think there’s this pretty significant large material benefit to be had. All these parents, all these advisors, employers not having that hold pulled back. In terms of benefiting, there’s a number of media publications or advisors who say “I’m only a retirement specialist”. Now, with this additional capability, you have all these people who may have been naysayers about 529s all of a sudden jumping on board. And there’s been a lot of positive momentum and, with that, more media, more push, more discussion, and more buzz. So that’s good.
JH: Yeah, it’s all good. It’s interesting the way you phrased that because our mutual friend and colleague Patricia Roberts joined me in My College Corner not too long ago and I asked her what the biggest 529 myth was that needed to be busted. And she offered that it was that 529s are only for four-year traditional schools. I said that I thought it was that a lot of families are under the misconception that if they have 529s or any kind of college savings that somehow they’re going to lose out on a lot of financial aid. I’m gonna put that in the excuse category. Why aren’t you saving? “Well I heard that my friend said that maybe I won’t qualify for financial aid.”
What do you think the biggest myth is that needs to be busted in 529s?
PC: You know, it’s very interesting, John. We just fielded our annual survey of parents. We do it every single year. And so we’re looking at all the open responses. And we ask people, for those that aren’t saving, why? And one person’s open response was – and this is still in the back of my mind – my child’s only 7, so I don’t need to start saving yet. So it’s become sort of my punch line: save early, save often, save automatically. Because the downstream cost is so high that you can’t wait until X number days.
It also circles back to you don’t need a Social Security Number yet to open up the account. You can open up the account for yourself, wait until the beneficiary is born, and then transfer it over from that side. But it’s never too early. I guess the point is that you shouldn’t wait until a certain date or age to start saving. That it really is a little bit easier of a lift. I think an interesting story is that I presented once on the same panel with this Noble Laureate based in Europe and his big takeaway was that there was this automatic statement account through the government for 2% saved automatically basically throughout one’s life to save for education. I think it’s kind of interesting because the scenario is automatically saving is just so critical and important to do over time.
JH: Yeah, no question. For Women’s History Month, I had a chance to interview Treasurer Ma from California very briefly. And I asked her, what is the one piece of advice that you would offer? And she said exactly what you said. Start early. Her parents were immigrants into this country. They saved, she and her brothers went through school. She has a fantastic story. And now she’s the Treasurer of the state of California. It’s really pretty remarkable. But she said, “start saving early”.
At My College Corner and Invite Education, we say that “Saving a Dollar Today Is Better Than Borrowing One Tomorrow®”. We just love that phrase. Looking back, Paul, we know what happened. Looking ahead is probably more important. If you can wave your magic wand, is there anything that you would do or that you would counsel your clients or the industry to do to sort of jumpstart the next level, get us to the next plateau for savings so that even more families can take advantage of these great benefits?
PC: Yeah, I would probably point towards the 2% automatic savings rates. I think that a lot of it is the sort of mental hurdles from the perspective of commonizing the mentality of saving for education. A lot of people have understood that “Oh wait, I gotta save for the 401K or 403B or to your retirement account”. But at the end of that, pivoting towards the mentality of education is something that you need to save for over the long term. Because I think a lot of it is that there’s a lot of opportunities to get people to save automatically over the long term, like 1% over an 18-year period does add up. Credit card points is another great one. During COVID we couldn’t use the credit card points or the miles or the hotels and so I think there’s different storyboards of being able to pivot the money from say daycare before they’re five years old over to saving for college. So I think there’s a lot of opportunities over the long run. But I think that from a magic wand perspective, I would say just changing the mentality or perhaps the awareness.
JH: So Paul, I’m just gonna close up the 529 section with this question. When you’re at the publicity committee at PAC 100 with the Cub Scouts and all, you have basically a peer user group. You’re living this experience with a 7- and 12-year old. Is there a sort of recognition with your parent peers that saving for college is important? Or are they just too busy right now doing Cub Scout and other things?
PC: Well, it’s a great point and a great question. These are busy times. But it’s a very top-of-mind topic. First and foremost, it’s the number one topic for the parents. Perhaps we need to rebrand it all from a “college fund” to a “get off my couch fund”. I say that very much tongue-in-cheek since kids are playing and they’re tackling each other, all good fun on that side.
But I do think it just makes it that much more important and interesting frankly to just start at that 1% automatic savings and increasing it 1% every year or whenever one can. That way it’s a lower lift. And there’s all the gifts and parties. I’d be remiss if we left the 529 section without me saying there’s the ability to pivot gifts over to 529 contributions. It’s never been easier to return those Amazon gifts that you may not like from Aunt So-and-So and pivot that over to the 529 fund.
JH: You’ve mentioned a bunch of drivers for success. Certainly the ease of use, the mobile apps, gifting platforms, everything the industry is doing to try to get the word out that 529s are really just not for college anymore, and it’s just not for one child. There are easy ways to begin to save. And I always try to make this point to parent groups. No matter how much you save, at the end of the day, you can’t be an optimist, you can’t be a pessimist when you look back on it. You have to be a realist and say this is how much we saved and we did a great job. We did as best we could to save whatever we could. And that’s gonna reduce the cost of college, perhaps significantly reduce the amount of student loans that we have to take, and therefore increase that return on investment for a college student. So I think that’s really all just absolutely fantastic.
Let’s move on. I love your title. Director of 529 and ABLE Solutions. Tell me if I’m wrong, you track this day-to-day, I see it from conference-to-conference. The ABLE community is a strong one, but, much like the 529 savings programs were in the 90s and the 2000s, it’s kind of at the infancy of getting the word out and getting the benefits out. There’s always a lot of detail around government programs. Just talk to us a little bit about what the ABLE programs are and how they are evolving.
PC: As it boils down to fellow parents, it’s a very easy conversation where the question does come up. What happens if my child becomes disabled? Or I have two children, one has a 529 and one has an ABLE account? It’s actually a very simple conversation and pivot point from that perspective. The ABLE accounts were born out of 529s. They saw the success of 529s as a model to borrow from and build off of. And so this year, there’s going to be the 10-year anniversary of the passage of ABLE from that perspective.
That being said, there was some time between the passage of the language and actually launching the plans. I think the first plan launched in the second quarter of 2016. So they’re still growing. The qualified expenses are much wider and much sooner so that the success cycle happens much more frequently because you can put the money in, save for a bit, and then use it. There’s much more quicker use cycles from that perspective. So we’re seeing that the assets are growing, that people are using it, and that’s a great thing.
JH: Across the country, I know ABLE programs come to be in different ways. Are most of the ABLE plans run by the same group that’s running the 529 savings and prepaid programs? Or is it an entirely different group? Is there a coordinated success sharing from one group to the other? How are they working to really get the ABLE plans launched in a big way?
PC: By and large, it’s the same groups, same team. They’re able to knowledge-share from one group to the next. Slightly different product structure. So there’s roughly 45 ABLE programs, but the vast majority of them are hub-and-spoke and consortium models, which is interesting. And a lot of the record keepers, the institutional players in both spaces, do tend to be the same.
That being said, on the state side, they do tend to be different folks, different divisions. A lot of them are, for example, underneath the treasurer umbrellas.
JH: I’m very hopeful that these programs will start to take hold. At the recent College Savings Plan Network National Association of State Treasurers meeting, we had a chance to meet the woman who actually pushed the ADA legislation through. I think you were there for that and that was so special to see and hear those stories. This is always about how these public policies impact families directly. And we’re starting to see more and more of that in the student loan realm with the FAFSA fiasco when we start to hear directly from families about “this is changing the way I’m thinking about going to college”.
On the other side of the coin, with the ABLE programs, you’re hearing directly from families “this is changing how I’m able to take care of my child or my loved one”. And so it’s really very special. And the ABLE programs, I think, enable all of us to rally around something that is absolutely spectacular.
PC: Yeah, and for ABLE accounts, the bigger transition coming soon is ABLE Age Adjustment Acts. So typically in order to open up a bank account, your age of onset needs to be before the age of 26 and very soon it’s going to be before the age of 45. So we’re going to increase the number of potential account users from 8 million eligible users to roughly 15 or just over 15 million eligible users. I think it’s important, it’s material, and it will change lives as well.
JH: That’s really spectacular that you brought that up because when you think about the evolution of the 529 programs, they started in the 90s, and then the big changes came in, I’ll call it 2010 to 2020 with the expansion in the uses that we talked about. Now very recently with the Roth. I think what happens is the policymakers like to see whether or not this is going to be successful, what their constituents are thinking about it, and then they add on. And so perhaps ABLE got a little boost from the success of the 529 programs, and we’re already starting to see the next evolution of the ABLE programs. Thank you for bringing that up.
Paul, I have one last sort of catch-all question because you’re so good at this. When we talk about ABLE, when we talk about 529s, is there anything coming on the horizon beyond what we just talked about with the ABLE programs? Is there anything that you see that we all ought to be focused on as we’re thinking about helping these different constituencies? Do you have any advice as we’re thinking about trying to help families understand how these programs can help them?
PC: Yeah, I do think ultimately as a boil down for 529 and ABLE, the probably two different documents I kind of point people to is obviously the IRS code that kind of provides the federal guidelines. But also the plan disclosure statement. I do think that there’s a lot of information out there for both programs. But obviously for accounts, there’s probably much more so in terms of pulling the plan disclosure statements to answer the questions because that is the ruling guideline for that land.
Broadly speaking, for 529 plans, I think that the big catch-all piece is that it is broadening from a demographics perspective and qualified expenses. We’ve seen 529s going from just college to computers and textbooks to room and board to K through 12 and apprenticeships and student loans over to the ability to distribute over to Roth IRAs. And I think that the next broader piece is stackable credentials and all those different sort of educational components there. So it is a broadening, strengthening piece. So I think on the 529 side, that’s sort of where the ball and puck is going on that side.
For ABLE, there’s the two big components, one is the ABLE Age Adjustment Act in the scale and that scale will help us help the plans become sustainable and stay open and just really solidify their permanency. While on the topic of permanency, there’s all these temporary ABLE rules such as the ABLE to Work Act and a couple other ones that were put in as temporary measures. There’s a focus on making those permanent.
And then from that perspective, one kind of final thought is that it is fairly straightforward to get access to your representatives up on the Hill. On the 529 side, of course, we’ve been, with CSF and CSPN and all the different groups, able to champion the legislation on that side. But I think on the ABLE side, it’s something where if you really believe and really confirm that you want certain things to really move forward, I think there’s opportunities to meet your representatives in your state, but of course in DC as well. And they want to hear what’s going on in their state and I think that’s an important element as well.
JH: You’ve been all over social media helping us understand the importance of using social media storytelling in all different facets of your work. Take a few minutes and give us a few shameless plugs, please. Tell us about 529 Dash, where people can follow you on social media, and then really importantly, I can’t wait for your 529 Day 2024 Top Trends in 529 and ABLEs. Tell us about that and where we can reach you.
PC: First, two plugs. My College Corner. Follow John and all his great work in social media. Two, there’s a great book out there. “Plan And Finance Your Family’s College Dreams”. So please pick that one up. That’s written by John.
The goal of 529 Dash was based off of feedback that “Hey Paul and John, can you just really help just get the message out there about the importance of education and financial planning?” And so we launched a newsletter. I think we’re on issue roughly 300. And we do that in terms of just getting the message out there.
But also we have a webinar coming up on 529 Day. So please join. We’ll have Trisha Good from Ohio Tuition Trust Authority (OTTA) joining us on that one. 529 Day this year is during the work week, so it’s nice that we get to celebrate it. Last year, it was during the weekend and holiday. So this year we get to make sure it’s live and appreciate all the work you do, John.
JH: Thank you. I always learn a lot when we talk. I really appreciate you taking the time to join me today in My College Corner. Paul, anything else?
PC: Save, save efficiently, save often, and plan, save, and succeed. Which is what you wrote in 2016.
JH: Paul, thank you, and that will do it for this edition of My College Corner’s “Ask the Expert” with today’s guest Paul Curley, 529 program data guru.