economicsWhat 529 college plans can do for you

Texas families can plan for their loved one’s future as tuition rises

May 2025 | By Spencer Grubbs

This month, as families celebrate the end of another school year, they may be contemplating their children’s future education. To coincide with this timing and spread awareness about tax-advantaged college plans, National 529 College Savings Day is marked annually on May 29. With tuition rates rising, an early start on planning and saving for a loved one’s education is more important than ever.

Whether it be to offset costs of attending a four-year university, a community college or a trade school, there are two main types of 529 plans (named after Internal Revenue Service Code 529) — tuition plans and college savings plans.

With a prepaid tuition plan, families can pre-pay all or part of the costs of an in-state public college education.

With a college savings plan, account holders select an investment option when opening the account, usually based on their budget and investment risk tolerance. An age-based portfolio is most commonly selected, with investments based on the child’s age and adjusted automatically as they approach college. However, account holders can withdraw funds for qualified educational expenses at any time.

These plans give families the potential to save more for education over time compared with traditional savings accounts, certificates of deposit or taxable investments. Over 18 years, a tax-advantaged account like a 529 college savings plan could earn $41,000 more than a taxable account (Exhibit 1); however, it’s important to note that because these are investment accounts, growth is not guaranteed and account holders may lose money, including the principal invested.

Exhibit 1: Estimated Account Growth Over 18 Years, Tax-free Account vs. Taxable Account

Exhibit 1 data

Account growth over 18 years

Account Type	Growth
Tax-free	$219,950
Taxable	$178,416

The federal government allows states to create and administer their own plans; Texas has established three options:

Texas College Savings Plan®

— the state’s direct-sold college savings plan in which families can save for qualified education expenses at schools nationwide, including undergraduate and graduate tuition and fees, certain room and board expenses, books, and computer equipment.

LoneStar 529 Plan®

— similar to the Texas College Savings Plan, but families enroll in and maintain the account through a financial adviser.

Texas Tuition Promise Fund®

— the state’s prepaid tuition plan in which families lock in today’s rates for all or some future undergraduate resident tuition and schoolwide required fees at two- and four-year Texas public colleges and universities, excluding medical and dental schools. The Transfer Value of the plan can be used at Texas private colleges and universities, at out-of-state colleges and universities, and for registered apprenticeship programs. Transfer Value is the lesser of 1) the costs that tuition units purchased in the plan would cover at a Texas public college or university, or 2) the original purchase price of the tuition units plus or minus the plan’s net investment earnings or losses on that amount.

Climbing tuition

College tuition rates have been rising across the country, and Texas is no exception. According to the Texas Higher Education Coordinating Board, the average cost of tuition and fees for 15 semester credit hours at the state’s public universities increased by nearly $1,000 (21 percent) from fall 2016 to fall 2023 (Exhibit 2). Community colleges increased tuition rates similarly, by 22 percent, while public technical colleges saw a significantly bigger jump during this period, with a more than 66 percent increase.

Lamar State Colleges are an exception to spiking tuition rates in Texas in recent years. In 2019, the colleges announced a 25 percent tuition cut after the 86th Legislature allocated the three institutions more than $17 million in additional state funding. Tuition rates were 33 percent lower in 2023 than 2016.

Exhibit 2: Average total tuition and fees at Texas public institutions of higher education, fall semesters 2016-2023

Exhibit 2 data

Institution of higher education	Tuition and fees per 15 credit hours
	2016	2017	2018	2019	2020	2021	2022	2023
Public Universities	$4,379	$4,518	$4,719	$4,865	$5,048	$5,205	$5,252	$5,305
Community Colleges	$1,462	$1,520	$1,576	$1,624	$1,662	$1,693	$1,749	$1,790
Public Technical Colleges	$2,563	$2,621	$2,800	$2,893	$3,161	$3,950	$3,913	$4,276
Lamar State Colleges	$2,712	$2,819	$2,854	$2,130	$2,130	$1,781	$1,782	$1,817

Notes:

Tuition and fees are for 15 semester credit hours.

For public universities, community colleges and state colleges, amounts reported include statutory tuition, designated tuition, average mandatory fee, and average college and course fee. For public technical colleges, amounts include tuition only.

Source: Texas Higher Education Coordinating Board

Assets under management

Texas 529 college plans have helped more than 265,000 Texans prepare for future education costs, with current assets under management of $2.6 billion as of Dec. 31, 2024. The number of Texas 529 accounts and the total assets in those accounts have grown steadily almost every year since Comptroller Glenn Hegar assumed office in 2015 (Exhibit 3).

Exhibit 3: Number of 529 accounts and total assets in Texas,
2014-2024

Exhibit 3 data

Number of 529 accounts and total assets in Texas

Year	Accounts	Assets (in billions)
2014	71,119	$1.08
2015	75,497	$1.13
2016	79,223	$1.27
2017	79,547	$1.51
2018	86,180	$1.47
2019	89,349	$1.76
2020	92,648	$2.02
2021	96,571	$2.26
2022	99,400	$1.95
2023	102,165	$2.20
2024	107,614	$2.38

Note: Data as of Dec. 31 of each year.

Source: Texas Comptroller of Public Accounts

There’s no better time to plan for tomorrow

Starting to prepare early with a 529 plan for your child could better equip you to keep up with college expenses upon enrollment. Even if you can only allocate small amounts per month, consistent contributions can make a huge difference in the long run.