- Some parents favor Bitcoin over 529 plans, betting on higher long-term returns despite volatility.
- While 529 plans offer tax benefits, Bitcoin’s flexibility and growth potential attract crypto-savvy families.
Despite Bitcoin’s notorious volatility, some parents are turning to cryptocurrency instead of traditional 529 college savings plans, hoping for higher long-term returns. According to earlier reports from Crypto News Flash, more American parents are shifting from traditional 529 savings plans to Bitcoin, believing it offers better long-term financial security for their children.
A similar trend was also highlighted in a Bloomberg report, noting that families see Bitcoin as a hedge against inflation, which accelerated in December as consumer prices rose 2.6% from a year earlier. It is stated that,
Most parents typically worry about funding 529 college savings plans, brokerage accounts, or high-yield savings vehicles for their kids. Now, a subset of parents are eschewing these traditional methods, opting instead to accumulate Bitcoin to support their children’s future financial needs.
Why Parents Are Betting on Bitcoin
First, they believe Bitcoin’s growth potential outweighs the risks, offering an alternative to conventional savings methods. Crypto investment advocates argue that Bitcoin’s deflationary nature makes it a strong contender for long-term savings, unlike 529 plans, which require funds to be used strictly for education-related expenses.
If a student opts to start a business or travel instead, 529 withdrawals incur a 10% penalty and taxes. Additionally, 529 plans can impact financial aid eligibility, particularly when owned by grandparents. While state-specific tax benefits exist, high fees remain a concern.
The Financial Trade-Offs
Second, cryptocurrency’s treatment under financial aid rules is another factor to consider. Bitcoin holdings must be reported as assets on FAFSA forms, potentially affecting aid eligibility. If sold for a gain, profits are added to adjusted gross income, further reducing aid.
Meanwhile, only a handful of U.S. schools, like King’s College and Wharton, accept Bitcoin for tuition payments, and student loans cannot be paid directly in crypto, requiring taxable conversions first.
Could Bitcoin Join 529 Plans?
Currently, there’s no legal way to include crypto in a 529 plan. However, former President Donald Trump, who previously expanded 529 benefits to cover K-12 tuition under the 2017 tax law, has positioned himself as pro-crypto.
Whether future policy changes could allow Bitcoin in education savings plans remains uncertain, but for now, crypto-savvy parents are willing to take the risk.
At the time of writing, Bitcoin (BTC) is trading at $95,200, down 3.93% in the past day and 3.97% in the past week. See the BTC price chart below.
