The Smart Student Guide to Financial Aid This
web site provides state-by-state descriptions of the
various state Section 529 Plans. Please visit each plan’s
web site for current information about fund expenses,
minimum contributions and other information not summarized.
Devoted exclusively to the still-relatively new
Section 529 college savings plans. Here you’ll
find articles explaining what they are and how best
to use them. The site is notable for a database that
lists the key features of all state plans and includes
a 1 to 5 “cap” (as in mortarboard) rating
What is a 529 College Savings Plan?
Section 529 college savings plans are tax-exempt college
savings vehicles with a low impact on need-based financial
aid eligibility. Unlike prepaid tuition plans, there
is no lock on tuition rates and no guarantee. Investments
are subject to market conditions, and the savings may
not be sufficient to cover all college costs. However,
with this added risk comes to opportunity for potentially
earning greater returns.
Most 529 college savings plans offer an adaptive asset
allocation strategy based on the age of the child or
the number of years until college. These plans start
off aggressively when the child is younger, and gradually
switch to more conservative investments as college approaches.
Typically they will use four or five age ranges, such
as newborn-6, 7-9, 10-12, 13-15, and 16-18+.
Most 529 college savings plans also offer a variety
of risk-based asset allocation portfolios, ranging from
aggressive 100% equity funds to more conservative balanced
funds and money market funds.
Some 529 college savings plans offer a fund that protects
the principal against inflation and guarantees a minimum
fixed rate of return (typically 3%).
The money in the plan is controlled by the account
owner, not the child. So if the child decides to not
go to college, they do not have access to the funds
as they would with an UGMA account.
Section 529 college savings plans are similar in many
ways to retirement plans, such as 401(k) and IRAs, although
with much higher contribution limits and more favorable
Every parent (and grandparent) should consider investing
in a 529 college savings plan for their children (or