Tricia Scarlata of JPMorgan Asset Management said families must start saving for college early to keep pace with rapidly rising tuition costs.
This urgency stems from a growing gap between household income and the cost of higher education. As tuition increases outpace inflation, families who do not plan early face a higher likelihood of accumulating significant student debt or being unable to afford degrees.
Speaking on Bloomberg Television's "Bloomberg Money" program, Scarlata, who serves as the head of education savings at JPMorgan Asset Management, said college costs have more than doubled over the last 20 years [1]. She said early savings are essential because tuition continues to rise faster than the general rate of inflation.
To address these challenges, Scarlata pointed to 529 plans as a critical financial instrument. She said a 529 plan can stretch savings farther and provide specific tax advantages to the account holder.
"Families need to start saving now, even if the amounts seem small," Scarlata said.
The guidance comes as part of a broader effort by JPMorgan to help families navigate funding strains. The firm's college savings guide is now in its 13th year [2].
Scarlata said the compounding effect of early investments is the most effective way to mitigate the impact of tuition surges. By utilizing tax-advantaged accounts, parents can maximize the growth of their contributions before the student enters college.
“College costs have more than doubled in the past 20 years, making early savings essential.”
The persistent rise of education costs relative to inflation suggests that traditional saving methods may no longer be sufficient. By emphasizing 529 plans, financial institutions are pushing for a shift toward tax-advantaged, investment-based strategies to prevent a long-term debt crisis for middle-class families.
