529 Plans

Named after the section of the federal tax code that governs them, 529 plans are tax-advantaged programs that help families save for college. Selecting a plan requires homework. Every state offers at least one 529 plan and now a consortium of private colleges also offers a 529 plan. The tax advantages, investment options, restrictions, and fees can vary a great deal.

Before buying a 529 plan, you should find out about the particular plan you are considering, and be sure you understand the plan's description of fees and expenses. Request an offering circular or official statement from the plan sponsor or your financial professional. Most 529 plans provide this document on their Web sites, where it may be called the Disclosure Statement, the Plan Disclosure Document, or something similar. You can find links to 529 plan Web sites on The National Association of State Treasurers' College Savings Plans Network Web site or you can call them toll-free at 877-277-6496 for information on the 529 plans you are interested in.

Two Types of 529 Plans

There are two types of 529 plans: 529 prepaid tuition plans and college savings plans. Every state offers at least one of these types of plans. Some states offer both, and now a consortium of private colleges also offers a prepaid tuition plan.

Source: Government Services Administration