Navigating the College Affordability Crisis: Insights from College Savings Accounts

Guglielmo Briscese, John List and Sabrina Liu

No 34126, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: With higher education costs consistently outpacing inflation and public funding declining, college affordability has become a critical barrier to economic mobility for middle- and low-income families. While College Savings Accounts (CSAs), or 529 plans, offer tax-advantaged vehicles for college savings, their adoption patterns and educational impacts remain poorly understood. Using comprehensive administrative data from over 900,000 Illinois 529 accounts (2000-2023) linked to educational outcomes, plus complementary surveys of account owners and parents, we provide the first large-scale analysis of CSA participation and effectiveness. We find that while CSA adoption has expanded to every ZIP code in Illinois, participation remains concentrated among higher-income, more educated families. Financial literacy emerges as a key barrier: 61% of parents who could save enough to cover half of future college costs still perceive their potential savings as meaningless. Among participants, higher savings are strongly correlated with better educational outcomes, including four-year college enrollment, attendance at selective institutions, and the pursuit of post-graduate degrees. These findings suggest that targeted interventions addressing financial literacy gaps and misperceptions about modest savings could significantly expand CSA effectiveness as a tool for educational equity. Beyond state-level 529 program optimization, our findings suggest several promising avenues for federal policy coordination and institutional innovation.

JEL-codes: D14 G53 H31 I22 I24 (search for similar items in EconPapers)
Date: 2025-08
New Economics Papers: this item is included in nep-fle
Note: ED PE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34126.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Navigating the College Affordability Crisis: Insights from College Savings Accounts (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:34126

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34126
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().