Oklahoma 529 college savings plan has passed a major milestone. Here's a look at what's next

Both graduates of Northwestern Oklahoma State University, Justin and Nancy Tinder, of Tuttle, knew they wanted their children to also attend college. So when their oldest son was born in 2002, they took advantage of a then-2-year-old college savings program offered by Oklahoma. When their second son was born, they added another account for him.

Those savings accounts in what is now known as Oklahoma 529 are helping the Tinders pay for their sons’ educations, one at Georgia Institute of Technology and the other at Oklahoma State University. They’ve also helped contribute to a major milestone for the 23-year-old program, which on Oct. 30 surpassed the $1 billion mark in account withdrawals. Through Nov. 17, the total had risen to $1,003,786,327, which state Treasurer Todd Russ, whose office administers the program, said has helped more than 87,000 students with their educational savings needs.

In addition to college tuition and expenses, Oklahoma 529 funds can be used to help pay for CareerTech, professional and graduate school, K-12 tuition up to $10,000 annually per student and apprenticeship costs for programs registered and certified with the U.S. Secretary of Labor under the National Apprenticeship Act. The program is touted as an insurance policy of sorts against rising higher-education costs and as a way to avoid student loan debt.

Oklahoma 529 is a tax-advantaged investment, meaning state taxpayers can reduce their state taxable income by up to $20,000 if married filing jointly ($10,000 filing single) by contributing. In addition, earnings are tax-free if used for qualified education expenses.

“Since its start in 2000, Oklahoma families in all 77 counties have used Oklahoma 529 to help students develop skills and knowledge for a successful future,” Russ said. “Reaching $1 billion in redemptions shows not only the strength of Oklahoma 529 but also the new, more flexible choice it offers Oklahoma students to achieve their educational goals.”

A history of Oklahoma 529 and how it's evolved

The idea for Oklahoma 529 started in the mid-1990s. Early proponents of the plan in Oklahoma included then-state Sen. Brad Henry, a Shawnee Democrat who later became governor. Then-state Treasurer Robert Butkin, also a Democrat, recalls a bipartisan group of lawmakers working together with then-Gov. Frank Keating, a Republican, to develop legislation that resulted in the creation of the plan.

“Conceptually, the idea really tied into basic Oklahoma values,” Butkin said. “Oklahomans by nature don’t like heavy-handed government programs. They do prize the importance of individual responsibility and the work ethic. This is a kind of program that tied into basic strains of the Oklahoma people. This was not a mandatory government program of any kind, and we designed it to tie into freedom of choice for Oklahoma families.”

Oklahoma 529 began accepting contributions in April 2000, and Keating signed a bill adding tax breaks as an incentive the following year.

“The program takes away a government impediment to people saving for long-term education goals, to make the dream more attainable for their children,” Butkin said. “We tried to be proactive in educating Oklahomans in the miracle of compound interest. If you start saving early enough in their lives, even a modest contribution of $25 or $50 a month will grow and grow. It grows free of state and federal taxation. The slice that used to go to government is reinvented for a good purpose and a good goal.”

That’s been the case for the Tinder family. Even though they lived in Texas when they began their first Oklahoma 529 account, they knew they’d eventually raise their children in Oklahoma.

“We were very excited to get on board,” Justin Tinder said. “We were watching (the program’s creation) and it was exactly what we wanted to do. We knew the importance of going to college and knew once we were going to be parents, (saving for college) is something we were going to do.”

Oklahoma 529, which Russ said now has about 68,000 account holders, features 16 investment options, allowing account holders to determine a plan based on how much risk they’re willing to accept. The program has been managed since it started by TIAA-CREF Individual & Institutional Services. TIAA-CREF’s program management fee was cut in half as of Nov. 1, to 0.1%.

How Oklahoma 529 compares to other programs in the United States

Most states have some sort of 529 plan, and Oklahoma’s is considered a strong one, earning a bronze rating from Morningstar, an investment research and investment management firm that annually rates 529 plans.

“Oklahoma 529 provides a compelling option for education savers with its well-diversified enrollment-date glide path designed by a dedicated 529 team,” said Morningstar analyst Megan Pacholok. “The state’s tax deduction … makes it a must-have for Oklahomans.”

Russ, who’s from Cordell, has made a major push during his first year as treasurer to increase participation in Oklahoma 529 in rural areas, and he thinks the apprenticeship portion of the law potentially could make a difference in that area.

“We’re trying to really lean in and open up new markets outside of the metros, to make sure everybody has a clear understanding of what it is and what’s available,” Russ said.

Russ said the most challenging part of selling Oklahoma 529 is convincing young parents to actually start an account. Once that’s done, he said, the difficult part is over.

“That’s one of my focuses, is to get these young parents that are starting their families now and get them to understand the advantages for them and why it exists and how important it is to get in early,” Russ said. “The hardest thing to do is open the account — click the button. If it’s $25, $50, just get the account open. At that point, the utilization rate goes up dramatically if you can get them to that point, but it’s hard.”

This article originally appeared on Oklahoman: Oklahoma 529 passes $1 billion in redemptions. Here's what's next