The College Solution: A Guide for Everyone Looking for the Right School at the Right Price

529 Backgrounder

The 529 plan, which gets its name from a section of the Internal Revenue Code, received its start in 1996 thanks to federal legislation. Advocates greeted the 529 plan as a way for parents to stuff money into special accounts that offered an attractive tax advantage, which is even greater today.

The federal government, however, didn’t do families any favors when it left many of the details on how the 529 plan would work to individual states. With every state able to run its own program, lobbyists for financial service companies fanned out across the country to wrestle for their own piece of the action. This led to states approving plans, in too many cases, that contained mediocre mutual funds studded with bloated fees.

In fact, ...