Savings 101
Changes to the rules of 529 plans make them more attractive from a financial aid standpoint
There's one other change in store for 529 users: more information on the costs and benefits associated with these savings plans. The Municipal Securities Rulemaking Board, which helps regulate 529s, last month indicated that brokers, who sell 80 percent of 529 plans, are required to tell clients that their home-state plans may offer tax breaks and other benefits.
Parents may participate in a 529 sponsored by any state, but going out of state may cost them a tax deduction. The National Association of Securities Dealers fined Ameriprise Financial Services last October for failing to properly supervise 529 sales. Between May 2001 and October 2003, the NASD said, the company sold clients only one plan--the Wisconsin-sponsored 529--even though many investors could have snagged tax breaks by investing in their home-state plans. Selling investors out-of-state plans is permissible. But the MSRB will now require brokers to notify clients about the benefits of their in-state 529 plans.
Of course, parents are still left with the task of studying dozens of 529 plans to choose the one that's best for their family.
To help them out, the College Savings Plans Network, a clearinghouse for information on state-run college savings plans, has agreed to provide comparative data on competing 529s that parents can consult online, according to the MSRB.
While the CSPN is working to create an online site, parents can visit existing sites, such as savingforcollege.com, to plot their strategies to keep up with rising college costs.
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