Investment Options

Anyone may open a 529 plan. The plans usually offer stock or bond fund investments with variable returns. Some plans do guarantee a minimum return, according to the College Savings Plans Network, an affiliate of the National Association of State Treasurers.

Plan Types

Two different plans are available: prepaid tuition and savings. Savings plans are subject to market performance and are state administered. Tuition plans, offered in 13 states, lock-in current tuition rates for future attendance. States and higher education institutions administer them.

State Advantages

A resident who chooses a plan in her state could receive a state tax deduction, matching grant or exemption from state financial aid calculations, according to CSPN.

Plan Fees

Fees vary with the type of plan. Tuition plans usually levy enrollment and administrative fees, while broker-sold plans could also tack on annual maintenance and asset management fees, according to the federal Securities and Exchange Commission.

Covered Expenses

Earnings are only tax-free if they pay for college-related expenses, such as tuition, room and board, and mandatory fees, according to the SEC.

Source:

Sec.gov: Introduction to 529 Plans

Collegesavings.org: What is a 529