529 Educational Saving Plans and Student Loans

To encourage households to save for college education, states have developed the Section 529 college savings plan, named after a part of the Internal Revenue tax code that allows earnings to accumulate free of federal income tax and to be withdrawn taxfree to pay for college costs. Slow to gain acceptance, by the end of 2002, all states had such plans in operation. There are two types of plans: savings and prepaid tuition. Plan assets are managed either by the state’s treasurer or an outside investment company. Most offer a range of investment options.
  • The value of dollars invested in 529 plan accounts grew to $165 billion in 2011, an increase of 5 percent from the previous year.

 

NUMBER OF AND DOLLARS INVESTED IN 529 PLAN ACCOUNTS, 2007-2011 (1)

(1) Data prior to 2009 not strictly comparable to earlier data.

Source: National Association of State Treasurers.

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TOP TEN 529 SAVINGS PLAN PROVIDERS BY ASSETS, 2011

($ billions, end of year)

Rank Provider  Assets
1 American Funds $30.2
2 Vanguard 29.4
3 Fidelity 18.1
4 TIAA-CREF 7.8
5 AllianceBernstein 7.1
6 T. Rowe Price 6.6
7 Oppenheimer 6.1
8 BOA Merrill Lynch 5.6
9 Franklin Templeton 2.9
10 Wells Fargo 2.7
  Top 10 providers $116.5

Source: National Association of State Treasurers.

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  • The top 10 providers of 529 savings plans held $116.5 billion in assets at the end of 2011, compared with $113.2 billion at the end of 2010.

 

TOP TEN STATES FOR 529 PLANS BY ASSETS UNDER MANAGEMENT, 2011

($ billions, end of year)

Rank State Assets under management
1 Virginia  $33.8
2 New York 12.1
3 New Hampshire  9.8
4 Florida  9.7
5 Nevada  8.3
6 Rhode Island 7.1
7 Ohio 6.4
8 Maine 5.6
9 Illinois 5.2
10 Alaska (1) 4.2

(1) California and Utah, both with $4.2 billion in assets under management, also ranked 10th.

Source: National Association of State Treasurers.

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FEDERAL STUDENT LOANS

Before July 1, 2010, federal student loans (including Stafford, PLUS and Consolidation Loans) were granted to students by private lenders under the Federal Family Education Loan (FFEL) Program. The 2010 federal Health Care and Education Reconciliation Act eliminated the origination of these loans by private lenders. The loans all now come directly from the U.S. Department of Education under the Direct Loan Program. The Consumer Finance Protection Bureau put student loan debt outstanding at about $1 trillion in 2012, including private and direct government loans. As of 2011 there was $326 billion outstanding under federal student loans originated by private lenders under the FFEL Program. The chart below shows privately financed FFEL loans that are still outstanding.

 

TOP 20 PRIVATE HOLDERS OF FEDERAL STUDENT LOANS, 2010-2011 (1)

($ millions)

    Amounts outstanding
Rank Loan holder (2) Fiscal year 2010 Fiscal year 2011
1 SLM Corporation (Sallie Mae) $143,821.9 $114,894.8
2 National Ed Loan Network (NELNET) 24,514.3 25,169.2
3 Citibank, Student Loan Corp. 27,911.8 24,645.9
4 Wells Fargo Bank N.A. 20,722.4 17,923.0
5 Brazos Group 12,080.4 10,976.0
6 JPMorgan Chase Bank 9,616.5 9,370.8
7 Pennsylvania Higher Education Assistance Agency (PHEAA) 9,575.1 8,172.2
8 Pittsburgh National Corp. (PNC) 7,549.0 7,731.9
9 College Loan Corp. 8,669.4 7,644.7
10 Student Loan Xpress 8,317.3 7,395.9
11 Goal Financial 6,881.4 6,465.9
12 Suntrust Bank 4,067.3 5,332.2
13 Access Group 5,737.8 5,217.8
14 Bank of America 4,777.0 5,210.1
15 U.S. Bank  4,768.7 4,251.2
16 Northstar 4,903.4 4,165.9
17 Missouri Higher Education Loan Authority 3,610.6 3,795.9
18 Edsouth 4,244.0 3,794.9
19 College Foundation Inc. 3,386.9 3,102.5
20 GCO Education Loan Funding 5,228.9 2,970.8
  Total, all holders $379,413.6 $326,480.9

(1) Includes Stafford (subsidized and unsubsidized) and Plus Loans; excludes consolidation loans.
(2) Entity that holds a loan promisssory note and has the right to collect from the borrower. As many banks sell loans, the initial lender and current holder may be different.

Note: Does not include direct federal loans.

Source: U.S. Department of Education, Federal Student Aid.

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