WSJ Your Money Briefing - What a Volatile Market Means for Your 529 Savings Plan

Episode Date: April 15, 2025

Last week’s turbulent stock market wiped out years of college savings for some parents. Wall Street Journal reporter Oyin Adedoyin joins host Julia Carpenter to discuss what this means for parents, future students and their 529 savings plans. Sign up for the WSJ's free Markets A.M. newsletter.   Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's ymb at wsj.com. Now onto the show. Here's your money briefing for Tuesday, April 15th. I'm Julia Carpenter for The Wall Street Journal. The market had quite the tumble last week, capping off some of the most volatile days in the history of the stock market. So you might have panicked a bit when you checked your investment portfolio or your 401k or even your 529 college savings plan.

Parents are advised by their financial advisors to not freak out first of all, you know, take a deep breath, not panic, and just secure as much of their gains as possible. But whether your child is still in diapers or already 18, there are steps you can take to prepare financially. We'll hear more from Wall Street Journal reporter Oyin Adedoyin after the break.

Across the country, millions of teenagers and their families are gearing up for college. But what can they do to protect their college savings now? WSJ reporter Oyen Adedoyan joins me to talk about it. Oyen, this week we're looking at how people can navigate decision making right now. You and I have reported on this quite a bit. And something that we've reported on in the past is how families have had issues financing college in recent years. You know, there was the hope of student loan forgiveness, then FAFSA issues, then all new kinds of plans rolled out.

How does what's happening now compare? It's pretty similar. A lot of parents that I spoke with are anxious. And at the same time, they're seeing kind of financial structures that the government created not pulling through for them in some ways. You know, we're seeing a lot of instability when it comes to student loan repayment as that returns. And a lot of their peers have thousands, if not hundreds of thousands of dollars that they owe in student loans. And they're saying, I don't want my kid to have to deal with that.

And many of these parents started 529 Plans more than a decade ago in the hopes that it would eventually pay for tuition when they had children. But now years of gains on those accounts may have been wiped out. So what do financial professionals suggest those families do? I mean, that's exactly true, Julia. 529 plans have gotten super popular in recent years. There are more than 17 million accounts that hold 525 billion in assets. And that was just as of the end of last year, which is up from 157 billion in 2010. So this is both a combination of parents putting regular payments into their 529s, but also gains from the market. And so a lot of those gains are now in jeopardy.

Parents are advised by their financial advisors to not freak out, first of all, you know, take a deep breath, not panic, and just secure as much of their gains as possible. I love what you're saying about taking a deep breath, but timing has to be such a huge consideration right now. Let's say someone's kid is a ways away from going to college, like over five years. What should they do? Financial advisors say that parents who have kids that are still in their early years

should be investing aggressively in some kind of 529 plan. I know the market is looking really scary right now, but they say not to be afraid of stocks. Don't let the market turmoil scare you. I talked with a parent who has three young children. She actually just had a baby and she's thinking about opening a 529 account for him and just really investing heavily in those stocks right now. She even actually said that on their birthdays she sends their account info to friends and families so they can contribute that money in there. So while your kid is young, it's the time to really invest heavily in the stock market. What about a family with a child who is just a few years away from college?

That's when things get a little different. Depending on how much money you want to be saving for college, parents should be moving about one to two years worth of tuition and other college expenses into more cash-like investments. And that's what financial advisors say. So let's say, for example, your kid just started high school and you've got about 60,000 saved in a 529 account. But let's say that tuition every year for an in-state school costs 10,000.

Financial advisors are saying that maybe you should park 20K of that money into a cash- like fund or some kind of investment that's going to get you maybe a yield of four to five percent, but won't be as risky like the stock market. And if someone has a child starting college in the fall, should they try to lock in the savings they have now? That's exactly what financial advisors are saying.

Try to move that money that you have now, even if you are taking a loss, into a cash like fund, like a bond fund, and at least have that money and potentially maybe dip into savings. Advisors also say don't count out scholarships. There are so many scholarships available right now. More schools are giving out financial aid as well. So those may also be things to think about that could offset the costs.

I'm wondering, does that strategy change once your child starts college? I'm thinking about a family who has a child who's already gotten an acceptance or maybe a child who's entering their sophomore year. One of the surprising things that I learned in this story has to do with the FAFSA. So if your kid has started college or starts college in the fall and you're selling 529 investments after the market turmoil began, that's almost a silver lining in a way. Because if you report a smaller balance for your 529 account on your FAFSA, that might actually mean that you end up with more financial aid because, you know, your assets aren't as high as they were. And even as you and I are talking right now, the market and the news are rapidly changing.

What should families keep in mind over the next few months? Families should keep in mind whatever their long-term plan already was. So the big word of advice from financial advisors is just stick to the plan, don't make any quick changes, and just have faith, which sounds a little scary right now, but is one of the key pieces of advice that I keep hearing. Last thing, Oyen, any big deadlines families should watch out for going forward? The timeline of the FAFSA has been a little rocky over the past couple of years, but this year the FAFSA comes out on October 1st. So parents should really be on the lookout for that. As you know, the earlier you complete it, the more chances you have at gaining financial aid,

or at least having a lot more clarity over what your financial situation is going to be like for your kid in the fall. That's WSJ Reporter Oyin Adedoyin. And that's it for your money briefing. We'll be back tomorrow with WSJ's Veronica Dagger to discuss how the trade war is impacting the real estate market. This episode was produced by Ariana Osborne with supervising producer Melanie Roy. I'm Julia Carpenter for The Wall Street Journal. Thanks for listening.