FinAid!  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.

SavingforCollege.com  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 system.

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 tax status.

Every parent (and grandparent) should consider investing in a 529 college savings plan for their children (or grandchildren).